They keep talking about cloud streaming, is anyone except executives at these companies taking cloud streaming seriously? Every time I've tried it it's been a mess of latency and fuzzy graphics. If I were at the CMA I'm not sure that's a factor in this deal that I would have given much thought at all.
It is because regulators don't want a monopoly to be formed around an emerging technology. Sure cloud streaming is not big at the moment but it could literally be the default way to play games in 20 years. Heck Microsoft themselves point this out to their investors. Google's monopoly on search and online advertising today could have been easily prevented 20 years ago by some regulations.
No it couldn't. Its fundamentally inferior to local hardware and no amount of wishful thinking will change the laws of physics.