London, UK - Microsoft’s $68.7-billion takeover of Activision Blizzard has been blocked by the UK competition watchdog, in a potentially fatal blow to one of the tech industry’s biggest ever deals.

Britain's Competition and Markets Authority (CMA) said it has prevented the mammoth buyout over concerns in the cloud gaming sector.

Xbox owner Microsoft struck a deal to buy the maker of Candy Crush and Call Of Duty in January 2022.

Microsoft and Activision have both said they will appeal the decision.

Activision, which also makes the Crash Bandicoot and Spyro games, said it will "reassess [its] growth plans for the UK" as a result.

Microsoft meanwhile warned that the move "discourages technology innovation and investment in the UK."

The CMA argued that the groups failed to address its worries over protecting innovation in the fast-growing cloud gaming market.

The watchdog said the move will make Microsoft stronger in cloud gaming – where video games are played using remote servers and have no need for downloads – "stifling competition in this growing market."

It claimed that Microsoft already accounts for between 60% and 70% of cloud gaming services.

Microsoft submitted a proposal in an effort to address concerns but the regulator said this contained a "number of significant shortcomings."

Brad Smith, vice chair and president of Microsoft, said: "We remain fully committed to this acquisition and will appeal."

The US Federal Trade Commission (FTC) also filed a lawsuit last year trying to block the merger.