Big U.S. technology groups are being told by Britain to build, not buy. This message was made clear by the country’s competition watchdog, which dealt a potentially

fatal blow to Microsoft’s $69 billion takeover of Activision Blizzard over concerns that the merger would harm competition in the fast-growing cloud-gaming market. The level for Big Tech to get mega-acquisitions through antitrust regulators has gone from hard to extreme.

The UK’s Competition and Markets Authority ruling is surprising. A provisional review in March concluded that Microsoft had no incentive to keep Activision’s games off rival gaming consoles. The CMA narrowed its investigation into the nascent market for cloud-based gaming. Meanwhile, Microsoft had offered concessions, including making popular titles like “Call of Duty” available to rivals such as Nintendo and Nvidia.

However, the UK watchdog ultimately decided that these commitments were not enough to ease its worries. Such remedies are subject to change and require regulators to police them in a fast-growing market, which is a tough job. According to CMA findings, Microsoft has an estimated 60%-70% share of the global cloud-gaming market.

Microsoft and Activision plan to appeal the decision, but the bar is high. The UK only looks at whether the CMA’s investigation and process were legal and properly followed; there’s no scope for the companies to offer further remedies. Other tech firms have learned this the hard way. Meta Platforms spent more than six months last year in a futile attempt to appeal the CMA’s rejection of its deal to buy animated-images group Giphy. Other antitrust regulators are also skeptical, with Europe’s antitrust watchdog set to announce its own ruling by May 22 and the U.S. Federal Trade Commission scheduling a hearing for August.

Investors are not giving up hope entirely. Activision shares fell more than 10% on Wednesday morning to around $77, well below Microsoft’s $95-a-share offer. However, the Stoxx Global Video Gaming and E-sports Index is down 25% since Jan. 17, 2022, the day before Microsoft launched its bid. If Activision shares had simply tracked the index, they would now be worth less than $50.

The UK’s decision establishes it as a muscular player on the global antitrust stage. Of the more than 800 acquisitions made by big tech firms over the past two decades, Meta’s deal to buy Giphy was the only one to be blocked outright. This is another sign that Big Tech firms will have to expand by building, rather than buying. Photo by Coolcaesar, Wikimedia commons