The U.K.’s Competition and Markets Authority said Tuesday it will launch a strategic market status (SMS) investigation into Microsoft Corporation’s (NASDAQ:MSFT) business software ecosystem, as part of a broader push to increase competition in cloud services and workplace software.

The watchdog said the move comes at a pivotal moment as artificial intelligence reshapes productivity tools. Hundreds of thousands of U.K. businesses and public sector bodies rely on Microsoft products such as Windows, Word, Excel and Teams, with newer AI tools like Copilot gaining traction.

An SMS designation would allow the CMA to address concerns that Microsoft’s software licensing practices may be limiting competition in cloud services, while helping ensure a level playing field as AI adoption accelerates.

Microsoft, Amazon Adjust Cloud Practices

Following engagement with the regulator, Microsoft and Amazon.com, Inc. (NASDAQ:AMZN) have outlined steps to improve interoperability and reduce cloud egress fees for U.K. customers. These changes aim to lower costs and make it easier for organizations to use multiple cloud providers.

The CMA said it will continue to monitor both companies to ensure the measures deliver tangible benefits. It also signaled that further action may be needed to improve switching and multi-cloud adoption, with progress to be reviewed in six months.

The regulator’s 2025 cloud market investigation found Amazon and Microsoft hold significant market power, with barriers such as egress fees and limited interoperability restricting customer choice.

AI Integration Raises Stakes

The CMA said concerns extend beyond cloud into Microsoft’s broader software ecosystem, including operating systems, databases and security tools that underpin modern business operations.

“The embedding of advanced AI, including assistants and emerging agentic technologies, into familiar workplace tools means this is a pivotal moment for the sector,” the CMA said.

Chief Executive Sarah Cardell added: “We’re using the regime in a flexible, pragmatic way to deliver real impact, as quickly as possible, for U.K. customers.”

She said the CMA expects further progress from Microsoft and Amazon, while the new investigation will address licensing concerns and support competition as AI becomes embedded in everyday software.

MSFT Price Action: Microsoft shares were up 2.71% at $368.68 at the time of publication on Tuesday, according to Benzinga Pro data.

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