Why does the UK have jurisdiction in this question? They're both American companies are they not?
They technically only have jurisdiction over the UK, so it would only impact their own market. But that market accounts for nearly 10% of the global gaming market, so this is not something you can easily ignore. That's also why MS is already trying to gaslight them, by saying that they will need to pull out and this will be bad for consumers. On top of that, the FTC and European Commission are still actively reviewing the deal, so this blow could also set up a chain reaction. From the political POV, the EU certainly doesn't want to be perceived as less strict than the Anglo-American places.