Microsoft’s Activision $68b deal will stifle competition, a UK watchdog claims.

In the UK, the antitrust watchdog stated on Wednesday that Microsoft’s stalled $68.7 billion acquisition of the video game business Activision Blizzard will harm players and hinder competition.

The transaction may improve Microsoft’s position in the expanding cloud gaming sector, according to Britain’s Competition and Markets Authority, which ruled that it could “hurt U.K. gamers who cannot purchase pricey consoles.” In cloud gaming, users stream games to their own smartphones and handhelds.

The mega-deal may also harm British gamers by “weakening the important rivalry” between Sony’s PlayStation and Microsoft’s Xbox, the watchdog warned in a preliminary investigation.

Because it would give Microsoft control over well-known game franchises like Call of Duty, World of Warcraft, and Candy Crush, the all-cash deal, which is expected to be the biggest in the history of the tech industry, is up against resistance from Sony and opposition from American and European regulators.

According to Martin Coleman, chair of the impartial expert panel that conducted the assessment, “our role is to make sure that U.K. gamers are not caught in the crossfire of worldwide accords that, over time, could harm competition and lead to higher costs, fewer options, or less innovation.” “We have tentatively determined that this may be the situation here.”

Microsoft is “committed to proposing effective and readily enforceable solutions that meet the CMA’s concerns,” according to Rima Alaily, deputy general counsel for the business.

In an internal email to staff, CEO Bobby Kotick said Activision looks forward to continuing constructive discussions with regulators in Britain and the European Union, where a separate investigation is ongoing. Activision also said it hopes to “be able to help the CMA better understand our industry.” We also believe that the law, as well as the evidence, is on our side, he added.

The U.K. Microsoft’s hopes that a prompt favorable conclusion could aid it in resolving a lawsuit initiated by the U.S. were dashed by the announcement that the antitrust inquiry is now expected to last for a few more months.

The British regulator stated that for its final report, which is due on April 26, it will solicit input from interested parties, including potential solutions to address its concerns about competition.

The FTC has attempted to halt the transaction on the grounds that it would violate antitrust rules by stifling rivals of Xbox and its expanding gaming subscription service.

Microsoft informed the FTC’s administrative court in January that it was attempting to end both the U.K. and EU investigations and planned to return recommended remedies to American regulators.

The Activision Blizzard agreement is only one of several regulatory issues that Microsoft is currently facing in Europe. Big Tech companies are now being closely watched on both sides of the Atlantic due to concerns that they have grown too dominant.

The popular video game Call of Duty by Activision is one of the deal’s sticking points. Microsoft has pledged to make it available across all platforms, but Sony has expressed fears about losing access to a game it calls a “must-have.”

The benefits of the agreement for players and developers as well as the growth in the market competition are preserved by our pledge to provide long-term 100% equal access to Call of Duty to Sony, Nintendo, Steam, and other companies, according to Alaily.

The U.K. watchdog suggested that options to allay its worries include blocking the deal, selling off a portion of Activision’s business, or a so-called behavioral remedy like an agreement to make well-known games like Call of Duty accessible on other platforms, which it claimed would be less effective.

It’s not the first time the British watchdog has exercised its enforcement authority over a deal involving Big Tech. It prevented Facebook parent Meta’s acquisition of GIF-sharing service Giphy last year due to worries about competition, prompting the social media corporation to rescind the agreement.