Microsoft has been working for months to satisfy concerns about the $69 billion deal raised by Britain's Competition and Markets Authority (CMA), which has been increasing proactive in taking on "Big Tech" since Brexit.

The ruling - which the U.S. company has vowed to appeal - sets a precedent for the European Commission - due to issue its own verdict next month, and the U.S Federal trade Commission.

Microsoft offered Sony a 10-year guarantee that new versions of "Call of Duty" - one of the most valuable franchises in gaming - would be available on PlayStation at the same time as on Xbox. Nintendo secured a similar deal.

That only answered the CMA's console concerns, leaving cloud gaming as the only remaining - and apparently lower - hurdle.

Defining cloud gaming is not simple.

Platform types and business models are still evolving, and several 'gaming as a platform' services have struggled to succeed, such as Google Stadia, according to a submission to the CMA's inquiry by UCL School of Management's Joost Rietveld.

TRANSIENT TECHNOLOGY?

Activision has not made its titles available on cloud services, calling them a "transient technology", while Microsoft, which offers the Xbox Game Pass service, has said cloud gaming is "no more than a feature".

The CMA disagreed, saying that cloud was the most rapidly growing sector in gaming, while consoles were a mature market.

It said Microsoft already accounted for 60-70% of global cloud gaming services and had other trump cards: Xbox, the leading PC operating system Windows and cloud provider Azure.

Microsoft agreed to offer some Activision games on a number of cloud platforms, including Nvidia, Boosteroid and Ubitus.

But the CMA said Microsoft's remedies omitted rival subscription models - like a Netflix for games - or providers not using Windows on PCs.

"(Microsoft's) proposals were not effective to remedy our concerns and would have replaced competition with ineffective regulation in a new and dynamic market," it said.

Quilter Cheviot equity research analyst Ben Barringer said: "Ever since Brexit, the UK regulator has taken an actively harsh stance when it comes to anti-competitive behaviour.

"This stance is ultimately what has led to its decision to put a halt to the purchase, as it concluded that Microsoft already has a dominant position and 'cloud gaming needs a free, competitive market to drive innovation and choice'."

(Reporting by Paul Sandle; Editing by Alexander Smith)

By Paul Sandle