(Reuters) - Britain's competition watchdog warned on Friday that Rentokil Initial already completed takeover of Mitie's pest control arm might restrict choice and lead to higher prices for customers.
In an unusual move by the Competition and Markets Authority (CMA) after a merger has been completed, the agency gave Rentokil a deadline of April 23 to make proposals to address its concerns or face an in-depth investigation.
"Having considered a wide range of evidence, it (CMA) has found there could be a substantial reduction in competition, which may lead to higher prices or reduced quality for customers," the said in a statement.
Although the competition regulator rarely demands that a merger by entirely rescinded, the CMA has taken such action in the past, dissolving market-leading university laundry supplier JLA's purchase in 2017 of its closest competitor Washstation.
"While we are pleased that the UK Competition and Markets Authority has found no substantial lessening of competition in the local and regional customer sectors, we will now review the decision in detail and consider our next steps," a spokesman for Rentokil said in an email.
"This is a small acquisition in line with our strategy to acquire high-quality pest control businesses in growth and emerging markets," added the company, which in contrast to Mitie makes most of its revenue outside Britain.
Mitie, which sold the business to Rentokil for 40 million pounds last year, did not respond to requests for comment. Shares in the British outsourcing group dipped 1.4 percent in early trade in London.
(Reporting by Noor Zainab Hussain and Sangameswaran S in Bengaluru; editing by Patrick Graham)