Investing.com -- Activision Blizzard (NASDAQ:ATVI) shares are trading lower in premarket trading on Wednesday after the U.K.'s Competition and Markets Authority (CMA) issued an order blocking Microsoft's (NASDAQ:MSFT) proposed acquisition of the company by Microsoft.
In its final ruling, the CMA cited "concerns the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers over the years to come."
The agency ruled that having Activision's content available on Xbox Game Pass, Microsoft's own gaming ecosystem, "while beneficial to some customers, would not outweigh the overall harm to competition arising from this merger, particularly given the incentive for Microsoft to increase the cost of a Game Pass subscription post-merger to reflect the addition of Activision’s valuable games."
Commenting on Microsoft's prior efforts to address the CMA's complaints, the agency added: "Microsoft’s proposed solution failed to effectively address the concerns in the cloud gaming sector... (and) had significant shortcomings and would require regulatory oversight by CMA," with the Panel Chair Martin Coleman saying: "Cloud gaming needs a free, competitive market to drive innovation and choice."
The mega-deal, which values Activision at $68.7B, has been facing a probe from U.K. regulators since it was first unveiled in early 2022.
In March, the CMA said that "new evidence" showed that the move will not create a "substantial lessening of competition in relation to console gaming in the U.K." The CMA's announcement had been seen as a reversal from a prior statement in February which pointed to "competition concerns" raised by an extensive investigation.
"From the time the deal was announced [...], the antitrust focus was exclusivity of games (i.e., Call of Duty) on Xbox," analysts at Stifel said in a note. "And recent commentary from the U.K. suggested such issues had been adequately addressed by Microsoft, and thus we'd characterize today's announcement as rather surprising."
Shares in Activision are down by around 9% following the news. The stock is trading far above the $65 level it was at prior to the initial merger announcement.