The £1.28 billion acquisition of pub firm Ei Group by Slug & Lettuce owner Stonegate could result in higher drink prices for some customers, the competition watchdog has warned.
The Competition and Markets Authority (CMA) warned on Friday that it believes the deal “could damage competition in 51 local areas”, putting local pub customers at risk of price hikes.
However, the regulator said it had no concerns over competition on a national basis, and said the deal will be cleared without further investigation if a solution is found in these specific areas.
Stonegate is already mulling putting about 40 sites on the market, with the majority being purchased Ei Group assets, according to reports by industry publication Propel.
Stonegate initially agreed to the deal to buy the 4,000-strong pub owner in July.
The CMA said it believed the deal could now “reduce choice for pub goers” in the 51 local areas where it said the combined business would “face only limited competition”.
It said it is thus concerned that the merger could mean that “pub goers in those areas could be faced with price increases or lower quality products and services”.
The companies now have until December 13 to suggest proposals to the CMA in order to address these concerns.
The CMA said it will order a more in-depth phase two investigation into the deal if proposals are not offered, or sufficiently address the regulator’s concerns.
In a statement, the watchdog said: “Stonegate Pub Company’s proposed purchase of Ei Group does not raise UK-wide competition concerns, but could damage competition in 51 local areas.”