The competition watchdog has found that rat catcher Rentokil’s takeover of Mitie’s pest control unit could restrict choice and lead to higher prices for customers.
Following a Phase 1 probe, the Competition and Markets Authority (CMA) said the deal could see a substantial reduction in competition.
It could lead to “higher prices or reduced quality” for customers that primarily use a single provider across the whole or a large part of the UK.
This is because, the CMA argues, Rentokil and Mitie are two of the four major suppliers at this level, with a large combined market share.
Rentokil acquired the business last year for £40 million.
The CMA added that it is unlikely that other companies will expand or enter the market in a timely manner and offset the loss of competition caused by the merger.
Rentokil must now offer proposals to address the concerns by April 23 or face an in-depth Phase 2 investigation into the merger.
The firm also fell foul of the antitrust body in January, when it was ordered to sell several large supply contracts in order to quell concerns about its merger with rival Cannon Hygiene.
Following a probe, the CMA said the tie-up would result in “higher prices or a worse service for customers”.