The UK's antitrust watchdog said in a provisional report on Wednesday that a plan by Microsoft to buy game company Activision Blizzard would stifle competition.
The result of the Competition and Markets Authority's (CMA) investigation constitutes a further hurdle for the gaming industry giant following similar concerns in the US.
The CMA said that the deal — that would see Xbox-brand owner Microsoft take over one of the games industry's biggest publishers — would strengthen Microsoft's industry position, "harming UK gamers who cannot afford expensive consoles."
Rivals and regulators raise the alarm
The proposed $68.7 billion (€64.03 billion) deal is set to be the largest in tech industry history.
It would see popular franchises Call of Duty, World of Warcraft and Candy Crash all fall into Microsoft's hands.
It has seen pushback from console rival Sony — whose PlayStation machines are the main alternative to the Xbox — as well as EU and US regulators.
The CMA said the merger could end up "weakening the important rivalry" between Xbox and PlayStation, thus reducing competition and resulting in higher prices, less innovation and fewer choices.
"We have provisionally found that this may be the case here," CMA investigation chair Martin Coleman said.
What's next for the Microsoft Activision deal?
The final CMA report is expected in late April, giving time for the watchdog to seek possible solutions from all parties to address its competition concerns.
But Microsoft had been hoping for a speedy resolution in the UK and EU so that it could bring back proposed remedies to the US Federal Trade Commission (FTC), which filed a lawsuit against the deal in December.
The company is also facing other regulatory issues with the European Union as the bloc seeks to take on Big Tech, worrying that the industry has become too dominant.
Regarding the Activision buyout, Microsoft has pledged to keep the Call of Duty franchise available on all platforms, addressing one of the CMA concerns.
"Our commitment to grant long-term 100% equal access to 'Call of Duty' to Sony, Nintendo, Steam and others preserves the deal's benefits to gamers and developers and increases competition in the market," Corporate Vice President and Deputy General Counsel Rima Alaily said.
"We hope between now and April we will be able to help the CMA better understand our industry to ensure they can achieve their stated mandate to promote an environment where people can be confident they are getting great choices and fair deals, [and] where competitive, fair-dealing business can innovate and thrive," a spokesperson for Activision Blizzard said.
