The Competition and Markets Authority rules against Microsoft’s $69 billion bid for Activision Blizzard, the maker of Call of Duty, Warcraft, and The Elder Scrolls

LONDON — British regulators on Wednesday blocked Microsoft’s $69 billion purchase of video game maker Activision Blizzard, thwarting the biggest tech deal in history over worries that it would stifle competition in the fast-growing cloud gaming market.

The Competition and Markets Authority said in its final report that “the only effective remedy” to the substantial loss of competition “is to prohibit the Merger.” The companies are going to appeal.

In the run-up to the decision, Microsoft had been attempting to show that Call of Duty would not be limited to its hardware and that other games would be available in the cloud. Sony questioned whether it could trust the promises of the company to make Call ofDuty available to it’s competitors.

Cloud gaming has the potential to change the industry by giving people more choice over how and where they play, said Martin Colman, chair of the Competition and Markets Authority’s independent expert panel investigating the deal.

“We remain fully committed to this acquisition and will appeal,” President Brad Smith said in a statement. He said that the watchdogs decision discourages tech innovation and investment in the United Kingdom.

“We’re especially disappointed that after lengthy deliberations, this decision appears to reflect a flawed understanding of this market and the way the relevant cloud technology actually works,” Smith said.

The watchdog said Wednesday that it reviewed Microsoft’s proposals to ease competition concerns “in considerable depth” but found those solutions would require its oversight, whereas preventing the merger would allow cloud gaming to develop without intervention.

There is a big representation of an all-terrain vehicle on the window of Microsoft’s London flagship store on Oxford Circus. A year after that deal closed, Microsoft launched an even more ambitious play—a $69 billion bid for Activision Blizzard, owner of some of the game industry’s most valuable intellectual property, including Call of Duty, World of Warcraft, and The Elder Scrolls.

The same technology that allows a process engineer to walk through a virtual oil refinery can be used to play games like Call of Duty. “So to be good at gaming is to be good at the metaverse.”

The ruling is unusual for antitrust, since it is based on what the merger will mean for an industry that is still at a very early stage. Sales of cloud-enabled services will more than double in the next five years to reach over $5 billion, according to data from Omdia. The regulator, though, argues that cloud gaming is growing fast, that Microsoft’s scale and power would give it a huge head start, and that it would have a strong commercial incentive to make all Activision titles exclusive to its platforms—stifling competition.