Summary

  • On 16 October, the CMA proposed designating Microsoft as having Strategic Market Status (SMS) in respect of a Business Software Ecosystem comprising five digital activities.
  • The proposal rests on a statutory test about activities being carried out together for a specific purpose. The consultation is open; any designation and later intervention remain separate decisions.

The important line in the Competition and Markets Authority’s new Microsoft case is not a product logo. It is the boundary around an activity. On 16 October the CMA proposed that Microsoft be designated as having Strategic Market Status (SMS) in respect of a “Business Software Ecosystem” made up of five digital activities. The proposal is provisional, and the consultation asks whether the evidence supports both that grouping and the other legal conditions for designation.

The five activities are PC operating systems, productivity software suites, security software, server operating systems and relational database management systems. The CMA is not proposing a single activity called “everything Microsoft sells”. Its decision defines a group of specified activities and explains why it considers them capable of working in combination.

The statutory hinge is combination for a purpose

Section 3(3)(b) of the Digital Markets, Competition and Consumers Act 2024 lets the CMA treat two or more activities carried out by one undertaking as a single digital activity where they can be carried out in combination to fulfil a specific purpose. That is a scope rule. It lets the regulator assess a connected set of activities together when the legal test is met; it does not turn every product in the undertaking into part of the group.

The CMA’s proposed purpose is an integrated business-software environment through which organisations manage and secure users, devices, computing resources, applications and data, while their users access, create, record, communicate and manage business information. In sections 4.162–4.181 of the proposed decision, the CMA says it assessed how Microsoft offers the activities and how organisational customers consume them. Its evidence includes Microsoft’s descriptions of integration, channels for combined purchases, technical interlinkages, customer environments and competition from rivals.

That reasoning makes the definition more than a label. If the group stands, the CMA’s assessment can examine whether the five activities complement one another inside an organisation’s IT environment. If the group is narrowed, the relevant evidence and the activity against which the SMS conditions are assessed would also change. The decision’s provisional finding is that the combined environment, rather than one individual task or product, is the specific purpose.

One group does not mean one customer uses everything

The CMA expressly says customers need not use all five activities together in every instance. Customers combine products in different ways; some use third-party products alongside Microsoft’s, and the degree of interconnection varies. The legal question in section 3(3)(b) is whether the activities can be used in combination for the identified purpose, not whether every buyer follows one standard bundle.

The decision also says the proposed group is no wider than the sum of its constituent activities. That does not amount to a conclusion that each activity, or every product within it, independently serves the same purpose. The distinction matters: evidence of integration can support looking across activities, but it cannot by itself erase the boundaries between the five categories or prove that every Microsoft product belongs in the assessment.

A designation gateway, not a remedy

Grouping is only one part of the statutory route. Section 2 requires a UK-linked digital activity and the SMS conditions, including substantial and entrenched market power and strategic significance. The CMA’s proposed decision makes provisional findings on those conditions. Responses to the consultation can challenge the activity boundary, the underlying evidence and the proposed designation.

The consultation closes at 5pm on 13 November 2026. The CMA says it will make its final decision by 13 February 2027. Until then, the case is not a final designation. Even if designation follows, the status would be a gateway to the UK digital-markets regime, not a finding of misconduct and not an order changing Microsoft’s conduct.

The distinction is visible in the CMA’s accompanying roadmap. It identifies areas for further evidence, including cloud services as an adjacent activity, Copilot and other AI features within productivity software, Teams, and security software. The roadmap says it does not set out evidence or reach a view on interventions that should be proposed or put in place. Any conduct requirements or pro-competition interventions would require later statutory steps and their own evidence. Cloud services therefore should not be folded into the five activities merely because the CMA plans adjacent work on them.

The consultation’s central question is consequently narrow but consequential: does the record justify treating these five activities as a combined environment for the purpose the CMA has identified? The answer will define the perimeter of any final SMS decision. It will not, on its own, answer what the CMA should require of Microsoft.

Sources

  1. CMA proposed decision, especially §§4.162–4.181
  2. CMA case page and timetable
  3. CMA consultation on the proposed decision
  4. Digital Markets, Competition and Consumers Act 2024, §3
  5. Digital Markets, Competition and Consumers Act 2024, §2 (SMS conditions)
  6. CMA roadmap of possible interventions
  7. CMA Appendix A: market-power assessments