UK regulator "targets" Microsoft (MSFT.US) business software: bundling and Copilot become the focus

According to the Smart Finance APP, the UK Competition and Markets Authority (CMA) stated on Friday that Microsoft's (MSFT.US) control over business software is making it more difficult for customers to switch providers, and has therefore proposed stricter regulation of the tech giant. The CMA said it would decide by February next year whether to designate Microsoft as having a “strategic market status.” Once designated, the CMA would have the power to intervene in areas such as cloud licensing, AI productivity tools, and security software.

The CMA said on Friday: “Microsoft’s advantage in the business software sector stems from the barriers customers face when switching providers; these barriers limit customers’ choices and weaken the competitive restraint from other software developers.”

This decision intensifies the regulatory challenges Microsoft faces in the UK. Three years ago, Microsoft engaged in intense regulatory confrontations with the CMA over its $69 billion acquisition of game publisher Activision Blizzard. In addition, the CMA is separately investigating whether Microsoft misled customers into paying more for software subscriptions after adding the Copilot AI product to its package.

Microsoft stated that it “does not agree” with the CMA’s views in the proposed decision regarding business software solutions. “All our products—including Copilot—are open and interoperable, enabling customers to use them alongside competing services.”

The CMA launched this investigation earlier this year due to concerns about Microsoft’s monopoly in business software fields such as office software, operating systems, and database management software. According to the CMA, these business software products include Word, Outlook, and Copilot, which together have around 20 million monthly active users in the UK.

The CMA is reviewing “whether Microsoft’s bundling and integration of its security products limits customer choice.” The regulator will continue its investigation to assess the possibility of intervening in software bundling and to provide customers with more options, including the choice of AI service providers that compete with Microsoft Copilot.