Microsoft’s proposed 68.7 billion dollar (£59.4 billion) takeover of games publisher Activision Blizzard could lead to competition concerns and requires a more in-depth investigation, the UK’s competition watchdog has said.

In concluding its initial phase one investigation, the Competition and Markets Authority (CMA) said it was concerned the proposed deal could lessen competition in gaming consoles, multi-game subscription services and cloud gaming.

The CMA has given the two firms five working days to submit proposals to address the watchdog’s concerns, or the deal will be referred for a more detailed phase two probe.

As well as being one of the world’s biggest computer companies, Microsoft is a key player in the gaming market, most notably through its Xbox range.

Activision Blizzard is best known as the maker of popular gaming series such as Call Of Duty and World Of Warcraft.

The CMA said it is concerned that if the deal is completed, it could harm rivals by refusing them access to Activision Blizzard games or providing access on worse terms.

The watchdog said it also received evidence about the potential impact of combing the broader ecosystems of the two companies, and that Microsoft could leverage Activision’s games alongside its own strengths in consoles, cloud computing and PC operating systems to damage competition in the growing market of cloud gaming services – where players are able to stream video games.

Sorcha O’Carroll, senior director of mergers at the CMA, said: “Following our phase one investigation, we are concerned that Microsoft could use its control over popular games like Call Of Duty and World Of Warcraft post-merger to harm rivals, including recent and future rivals in multi-game subscription services and cloud gaming.

“If our current concerns are not addressed, we plan to explore this deal in an in-depth phase two investigation to reach a decision that works in the interests of UK gamers and businesses.”

Phase two investigations allow an independent panel of experts to look in more depth at the risks identified in phase one.

In response, Microsoft president and vice chairman, Brad Smith, said the deal would not impact if and when Activision Blizzard video games would be released on rival systems.

“We’re ready to work with the CMA on next steps and address any of its concerns,” he said.

“Sony, as the industry leader, says it is worried about Call Of Duty, but we’ve said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less.”