Microsoft faces major UK probe: Is its software bundle about to be broken up?

Britain's competition regulator has officially fired a warning shot across the bow of Microsoft, launching a sweeping antitrust investigation into the tech giant's powerful grip on the business software market. 

The Competition and Markets Authority (CMA) announced on Thursday that it would begin a deep dive into whether Microsoft's practices are stifling competition and limiting choice for its vast customer base across the United Kingdom.

The probe, which is the fourth of its kind under new powers granted to the regulator last year, will assess whether Microsoft holds a "strategic market status" (SMS) in the sector. If Microsoft is designated with this status, the CMA would be armed with formidable new powers. 

These could include imposing "conduct requirements" to govern how the company behaves in the market, ordering changes to its business practices, and even mandating greater interoperability with rival services. This represents a more proactive and powerful regulatory stance than was previously available, designed specifically for the fast-moving digital economy.

CMA Chief Executive Sarah Cardell highlighted the critical importance of this market, noting that business software is a cornerstone of the British economy. "Hundreds of thousands of customers rely on Microsoft's systems," Cardell said in a statement. 

"Our aim is to understand how these markets are developing, Microsoft's position within them and to consider what, if any, targeted action may be needed to ensure UK organisations can benefit from choice, innovation and competitive prices." The investigation is expected to be a lengthy process, with the CMA stating it will conclude by February 2027.

The 'bundle' in the spotlight

At the heart of the investigation is Microsoft's long-standing strategy of bundling its products together. The CMA will scrutinise whether packaging its dominant Windows operating system with a suite of other essential tools - including Word, Excel, the Teams communication platform, and its new AI-powered Copilot assistant - unfairly weakens the position of rival companies. For UK organisations, this could mean less choice, higher prices in the long run, and a slower pace of innovation as smaller, more specialised software firms are squeezed out of the market.

Furthermore, the authority is set to look closely at Microsoft's software licensing practices, particularly in the cloud computing market. There are concerns that the tech giant’s terms make it significantly more expensive or difficult for customers to use its essential software on rival cloud platforms such as Amazon Web Services or Google Cloud. 

This practice could be seen as a way to unfairly push customers towards Microsoft's own Azure cloud service, a market the CMA has previously reviewed and concluded was "not working well".

A global pattern of pressure

This UK probe does not exist in a vacuum. It is part of a much broader global trend of increased regulatory scrutiny on major technology companies. Microsoft is reportedly facing similar antitrust examinations in other jurisdictions, including the European Union and the United States, over both its cloud and software business practices. 

The integration of artificial intelligence is a key battleground for regulators, who are keen to ensure that dominant players do not use their existing market power to gain an unassailable advantage in AI, effectively locking out innovative start-ups.

Old rivalries flare up

The issue of product bundling has already landed Microsoft in legal trouble. The investigation comes amidst an ongoing antitrust lawsuit in the UK filed by Salesforce-owned Slack, which alleges that Microsoft's decision to automatically include Teams with its Office suite is anti-competitive. 

This legal challenge in Britain echoes a similar complaint that Slack filed with the European Commission back in 2020. In response to the EU's concerns, Microsoft did make a concession, eventually agreeing to offer its Office suite without Teams at a reduced price.

In response to the new CMA investigation, a Microsoft spokesperson said: "We are committed to working quickly and constructively with the CMA to facilitate its review of the business software market."

The outcome of this major UK investigation could have profound implications. The final decision may not only reshape how software is sold and used by hundreds of thousands of British businesses but could also set a significant precedent for regulators tackling the power of tech giants across the globe.