Microsoft to face competition watchdog probe over business software

Microsoft’s business software operation is to face an investigation by the UK competition watchdog, which will assess whether tighter regulation is needed for its licensing practices for products such as Excel and Word.

The Competition and Markets Authority said it will launch a strategic market status (SMS) investigation into Microsoft’s business software ecosystem from May.

It means that the regulator could designate SMS status, which earmarks companies with an entrenched market dominance and can force them to make changes.

The CMA has said it could specifically act on any major concerns over how software licences reduce competition linked to cloud computing.

The investigation will look at software including Windows, Word, Excel, Teams and Copilot, used by hundreds of thousands of UK firms and public sector organisations.

The watchdog said it has also heard “wider concerns about Microsoft’s position in business software”, including productivity software and operating systems.

It comes after the regulator warned last year that the UK’s cloud computing market was “not working well” and suggested conduct requirements should be considered for the sector’s two main players, Microsoft and Amazon.

The CMA said on Tuesday that Microsoft and Amazon are taking actions on cloud egress fees and interoperability to support greater choice for businesses and the public sector.

It said the changes will reduce expense and effort for UK customers when using more than one cloud provider.

However, the CMA said it has made clear that “further steps are required” to help UK customers connecting multiple networks or when switching.

Sarah Cardell, chief executive of the CMA, said: “We’re using the regime in a flexible, pragmatic way to deliver real impact, as quickly as possible, for UK customers.

“This announcement shows we’re not just responding to today’s concerns but getting ahead of emerging issues too.

“Cloud remains central to our approach – we’ve seen real progress through our engagement with Microsoft and Amazon to drive meaningful improvements on egress fees and interoperability and we expect more action from them over the coming months.

“At the same time, we’re taking action now, deciding to launch an investigation into Microsoft’s business software ecosystem.

“An SMS designation would enable us to tackle remaining concerns around Microsoft’s licensing practices in cloud and would also enable us to ensure a level playing field as AI is rapidly embedded into everyday business software tools.”

In a blog post, Microsoft vice chairman and president Brad Smith said: “We recognise that the CMA will continue to review and assess additional issues relating to our products and services, including in the business software market.

“We are committed to working quickly and constructively to address these issues, including by providing all the information the CMA needs to move forward with its reviews.”

Andrew DeVore, vice president and associate general counsel at Amazon, said: “Our focus remains unchanged: empowering choice, fostering flexibility, and competing vigorously to earn customer trust every single day.

“We’re excited about the future of cloud computing in the UK and the role that AI will play in transforming how businesses operate and innovate.

“Through continued engagement with the CMA and UK customers, we’ll deliver the tools, services, and flexibility that UK businesses need to thrive.”