The UK's Competition and Markets Authority (CMA) has launched a formal investigation into Microsoft's business software unit, potentially placing the tech giant under strategic market status oversight. This move signals growing regulatory concern that Microsoft's dominance in Windows and Office software, particularly its Copilot AI assistant, could stifle competition from emerging AI rivals like Anthropic's Claude Code and Google's Gemini. The CMA aims to ensure Microsoft doesn't hinder the growth of these new entrants in the rapidly evolving AI software landscape.

Competitors Amazon Web Services (AWS) and Google Cloud have long argued Microsoft charges unfairly high fees for running its software on their platforms compared to its own Azure service. Despite a previous report finding the UK cloud market 'not working well', the CMA board stopped short of imposing new conduct requirements on Microsoft's Azure or AWS, instead securing commitments for improved cloud interoperability and easier switching. Microsoft and AWS agreed to make it cheaper and easier for customers to switch between their platforms and enable better data portability to smaller rivals.

The CMA will monitor progress over six months and review the market again. Microsoft president Brad Smith acknowledged AI is changing the market 'at an unprecedented pace', stating the company is committed to working constructively with the CMA. Amazon's VP highlighted new rights for UK customers to use multiple cloud services simultaneously and improved data portability as key commitments.

The probe underscores the intensifying regulatory scrutiny facing tech giants as AI reshapes software markets, with the CMA aiming to get ahead of emerging issues. Strategic market status could impose significant obligations on Microsoft to prevent anti-competitive behavior, fundamentally altering how it operates its core software business in the UK.