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In a blast from the past, Britain’s competition regulator has proposed designating Microsoft’s business software, including Windows, Word, Excel, Outlook and Teams, as having “strategic market status.” It's like 1998 all over again, except this time the CMA is proposing to regulate a single company precisely in the part of the economy where competition has never been stronger: AI. These kinds of fiddly regulatory interventions are bound to scare away investment and turn the entire scheme into a laughing stock. SMS status lets the CMA impose bespoke conduct requirements on how Microsoft designs, bundles and sells its products. This gives the regulator broad discretion to direct how software used by more than a million UK organisations is allowed to operate. The CMA's complaint is that the products are integrated, something CMA-commissioned research found businesses see as a “key benefit” and “relatively good value for money” and “more cost-effective than buying and managing separate licences.” Put plainly, people keep using Microsoft because the products work well together and they’re good value. This is very far from a market failure that requires intervention. It’s also a sector facing immense disruption in the era of AI-led software development. What's particularly mad is that Copilot is in scope too, even though ChatGPT has more than 1 billion weekly users, Gemini has more than 1 billion monthly users, and in UK workplaces, only about one in ten Microsoft Office users use Copilot. Gemini, Claude and ChatGPT together already have roughly as many workplace users as Copilot, after just two or three years. Just a year ago, the CMA kept Gemini out of Google’s designation because AI was moving too fast to call. The CMA’s legal test is meant to ask whether Microsoft’s position will be entrenched over the next five years. Five years ago, ChatGPT didn’t exist. Anyone confident about who will lead workplace AI in 2031 should be running a hedge fund, not a regulator. What's also interesting is that, despite the promises made when this regime was created, this regulation isn’t even well-targeted. The CMA’s real concern, from its cloud market investigation, was meant to be Microsoft’s cloud software licensing. Instead of targeting this issue directly, the CMA has opted for the widest possible net: five separate markets bundled into one ecosystem. The result is that nothing will be done till at least February 2027, and even then, conduct requirements aren't yet specified, which will require further consultations, delaying action well into 2027. Britain wants to be the best place in the world to build and adopt AI. Preemptively regulating the AI tools businesses are only just starting to use is a strange way to get there.