The Competition and Markets Authority said on Tuesday it will take a fresh look at Microsoft’s approaches, months after deciding not to act on earlier findings.

This time, the regulator is considering whether to give Microsoft “strategic market status” in business software, and this would allow closer oversight and direct intervention.

At the centre of the case is how Microsoft links its software, including Windows Server and Microsoft 365, to its own cloud platform. Regulators have noted that customers face extra costs when they try to run these tools on rival services.

That, they say, makes it harder for businesses to switch providers or spread workloads across different clouds.

Companies want flexibility and when pricing or licensing regulations get in the way, it limits choice and raises expenses.

The UK cloud market is tough. Amazon and Microsoft each control about 30 to 40% of the sector, covering services such as storage, processing and networking.

Google follows with a much smaller share of around 5 to 10%. Earlier findings from the regulator said this level of concentration was already affecting competition.

The CMA noted that both Microsoft and Amazon have recently taken steps to ease some of the pressure. These include reducing certain fees tied to moving data between platforms and improving how systems work together. Still, the watchdog expects more changes in the coming months.

CMA chief executive Sarah Cardell said the regulator is acting in a “flexible, pragmatic way to deliver real impact, as quickly as possible for UK customers”.

She added: “Cloud remains central to our approach – we’ve seen real progress through our engagement with Microsoft and Amazon to drive meaningful improvements on egress fees and interoperability and we expect more action from them over the coming months.”

Microsoft says the cloud licensing adjustments it has agreed to focus on data transfers, switching between providers and system compatibility.

Its vice chairman and president, Brad Smith, said: “The changes address the CMA’s commitment to ensuring that UK customers can continue to move, deploy, and operate their workloads in the clouds of their choice with confidence, flexibility, and ever-reduced friction.”

Amazon, for its part, said the steps it has taken formalise its support for customer choice, including the ability to run services across multiple cloud platforms.

Beyond the UK, regulators in both the European Union and the United States are examining similar issues in cloud computing. The focus is largely the same, reviewing whether large providers are using their position in software and infrastructure to limit competition.

Coming under the country’s new digital markets regime aimed at curbing monopoly and ensuring fairer competition, the decision follows months of investigation and consultation involving more than 80 stakeholders, including direct engagement with Google. 

According to the CMA, Google’s market position in the UK is “substantial and entrenched,” with the company commanding more than 90% of all search queries conducted in the country.

Will Hayter, executive director for Digital Markets at the CMA, said: “By promoting competition in digital markets like search and search advertising we can unlock opportunities for businesses big and small to support innovation and growth, driving investment across the UK economy. We have found that Google maintains a strategic position in the search and search advertising sector – with more than 90% of searches in the UK taking place on its platform.”

The designation does not amount to a finding of wrongdoing, nor does it impose immediate obligations. However, it grants the CMA the legal authority to enforce targeted decisions when necessary, including measures to enhance transparency and open access in the digital search market.

Under the new framework, which came into effect on January 1, 2025, the CMA has powers to issue binding conduct requirements and penalties for non-compliance. These measures are designed to ensure that technology firms operating in the UK do not exploit their market monopoly to the detriment of competitors and consumers.

In June, the regulator had outlined potential steps such as ensuring fairer search result rankings and offering users greater access to alternative search engines. It also clarified that Google’s AI-based features, including AI Mode and AI Overviews, fall within the scope of this designation, though its Gemini AI assistant is excluded for now, with its status to be reviewed as the market evolves.

Responding to the CMA’s decision, Oliver Bethell, Google’s senior director for Competition, spoke on the potential impact on innovation:

“Many of the ideas for interventions that have been raised in this process would inhibit UK innovation and growth, potentially slowing product launches at a time of profound AI-based innovation.”

The CMA, however, insists its approach will remain “targeted and proportionate,” aiming to drive innovation while ensuring fair play in digital markets. The regulator is expected to consult on specific interventions later this year.

If the CMA designates Google under this new status, enabled by powers granted under the Digital Markets, Competition and Consumers Act that took effect earlier this year, the tech giant would face a set of binding obligations. 

These include offering users alternatives to Google Search, giving publishers more control over how their content is used, and ensuring that businesses have fair access to search visibility. Simply put, the UK is moving to weaken Google’s grip on online discovery.

“Google search accounts for more than 90% of all general search queries in the UK, with millions of people relying on it as a key gateway to the internet,” said Sarah Cardell, CEO of the CMA. “If competition was working well, we would expect these costs to be lower.”

The regulator is particularly concerned about the implications of Google’s market monopoly on innovation, business costs, and user choice. In 2023 alone, UK businesses reportedly spent over £33,000 per advertiser on Google search ads, a figure the CMA believes reflects limited competitive pressure.

Should the SMS designation go through, Google would be required to implement “choice screens” that allow users to switch easily between competing search engines, including potentially AI-driven assistants. 

It would also have to ensure transparent and non-discriminatory search result rankings, a demand long stated by publishers and rival firms.

Another focus is how Google’s AI-enabled search features, such as AI Overviews, use third-party content. The CMA wants publishers to have more say in how their work is used, particularly given that such content often drive these AI-generated results without sufficient visibility or compensation.

The regulator hasn’t shied away from the fact that this is a transition in oversight. While the EU has already introduced digital regulations under the Digital Markets Act, the UK is opting for a case-by-case, targeted approach that still carries substantial consequences. 

The CMA now has the authority to impose fines and enforce decisions directly, a post-Brexit empowerment it intends to wield.

Google, unsurprisingly, has objected. “Punitive regulation could stop us bringing new features and services to Britain,” warned Oliver Bethell, Google’s senior director for competition. He added, “Proportionate, evidence-based regulation will be essential to preventing the CMA’s roadmap from becoming a roadblock to growth in the UK.”

Though the CMA is quick to stress that its proposed intervention is not a judgment of wrongdoing, it’s also clear that the agency believes Google has used its authority to suppress innovation. 

Beyond traditional search, the CMA also plans to monitor how generative AI technologies, which Google is increasingly embedding into search, may further entrench the company’s position. 

For now, the Gemini AI Assistant will not be covered under the proposed designation, but the regulator says this could change depending on how the technology evolves and is adopted.

This isn’t the only front on which Google faces such in the UK. The CMA is also examining its control over the Android mobile operating system in a separate probe, which could lead to an additional SMS designation targeting mobile software.

Globally, Google’s regulatory issues are increasing. It’s been hit with landmark antitrust cases in the United States, and in the EU it faces accusations of violating digital platform rules. 

The CMA is currently collecting input from industry stakeholders. Its final decision is expected by 13 October 2025.