That's fine if both companies (or the one resulting company) never wants to do business in the UK again...

Or they think the UK citizens won't throw the regulators and their bosses out of a job. I doubt many citizens in the UK feel strongly enough about the merger to want access to neither if they merge. People don't particularly like when you take their toys away.

If all that ends up being blocked are consoles and games, there are plenty of substitutes - in some cases near perfect substitutes.

It's a weird argument to block Microsoft and Activision merging in the name of competition and be ok with leaving less competition in it's wake.

MS could always just not merge with Activision.

> fine if both companies (or the one resulting company) never wants to do business in the UK again

There are loads of solutions to this problem, the most obvious one being pulling Activision titles out of the U.K. or spinning off independent distribution rights to that market.