The Competition and Markets Authority confirmed on 31 March 2026 that it will open a Strategic Market Status investigation into Microsoft's business software ecosystem, with formal proceedings beginning in May. The CMA's official notice ties the probe directly to its concluded cloud market investigation and to Microsoft's licensing of Windows Server, Microsoft 365, Teams and Copilot when used on rival cloud platforms.
What an SMS designation actually does
SMS is the UK's post-Digital Markets, Competition and Consumers Act tool for regulating entrenched digital firms. It is not a finding of wrongdoing. It is a status that, once granted, lets the CMA impose conduct requirements without each behaviour having to be proven anti-competitive in court. Google and Apple were given SMS designations in October 2025 for their mobile platforms; Microsoft would join that list for productivity software and Copilot if the investigation concludes the company holds substantial and entrenched market power.
The 9-month statutory clock begins in May. That puts a CMA decision in early 2027, with conduct requirements potentially in force by mid-2027.
Why Copilot is the unspoken core
The press notice does not single out Copilot, but the framing of the probe does. The CMA writes that "AI-driven innovation reshapes competition in productivity software", and the regulator's concern is that Microsoft's distribution advantage in Office and Teams will translate into an unbeatable head-start for its generative AI assistant. That risk is sharpened by Microsoft's licensing model, which prices Windows Server and Microsoft 365 higher when they run on Amazon Web Services or Google Cloud than on Azure, a finding the CMA confirmed in its concluding cloud report.
For European enterprise buyers, the practical question is whether SMS conduct requirements force Microsoft to unbundle Copilot pricing from underlying productivity-suite licences. If they do, the competitive surface broadens; if they do not, the probe will read as policy theatre.
The egress and interoperability commitments
Alongside the Microsoft SMS announcement, the CMA accepted commitments from both Microsoft and Amazon on cloud egress fees and on interoperability between cloud platforms. The commitments are voluntary and structured so that the regulator can revoke acceptance and reopen formal proceedings if either firm reneges. Egress charges, the per-gigabyte fees levied when customers move data out of a cloud, were singled out in the cloud-market findings as a structural reason workloads stick to incumbents.
The macfarlanes analysis published the same day notes that the CMA chose voluntary commitments over a parallel cloud-services SMS investigation, a decision that some observers read as a softening, but which the CMA frames as proportionality.
What European regulators take from this
The Bundeskartellamt and the European Commission both have ongoing scrutiny of Microsoft's cloud licensing terms. The CMA's probe gives them a parallel evidence base they can cite without having to assemble it themselves. It also creates a reference price for Copilot conduct rules: whatever the CMA imposes will set the floor for what enterprise procurement teams elsewhere demand at contract renewal.
Microsoft has said it will engage constructively. Amazon, the other cloud counterparty in the package, is unlikely to escape unscathed if its own commitments fail to materially loosen its egress terms by year-end.
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