(Reuters) - Britain's competition regulator has found that supermarket group Asda's 611 million pound ($742 million) purchase of the Co-op's 132 petrol stations and attached stores could lead to higher prices or less choice in some parts of the country.
The Competition and Markets Authority (CMA) said on Tuesday Asda must address its concerns to avoid an in-depth "Phase 2" investigation of the deal.
It said the deal raises concerns in 13 locations across the United Kingdom in each of which the merging businesses currently compete for customers and would not face sufficient competition after the merger.
"There’s a risk that customers could face higher prices or worse services in a small number of areas where Asda would face insufficient competition in either groceries or fuel," Colin Raftery, CMA senior director of mergers, said.
Asda, Britain's third largest grocer after Tesco and Sainsbury's, has five working days to offer legally binding proposals to the CMA.
The CMA would then have a further five working days to consider whether Asda's proposals address its concerns, or if the case should be referred to a Phase 2 probe.
Asda said it looked forward "to working constructively" with the CMA over the coming days.
Asda is owned by brothers Zuber and Mohsin Issa and private equity firm TDR Capital, who together also own petrol forecourt business EG Group.
($1 = 0.8229 pounds)
(Reporting by James Davey in London and Aby Jose Koilparambil in Bengaluru; Editing by Shinjini Ganguli, Kirsten Donovan)