The Competition and Markets Authority has raised concerns over the acquisition of Asda by two brothers from Blackburn in a deal worth £6.8bn.
The Issa brothers and private equity firm TDR Capital announced the purchase the supermarket giant through jointly owned company Bellis in October 2020.
The brothers and private equity giant also own Blackburn-headquartered EG Group, which operates 395 petrol stations in the UK, while Asda owns 323.
The CMA said that many of Asda’s and EG’s petrol stations are located in the same parts of the UK and its investigation focused on these overlaps.
The watchdog added that it has found the deal raises local competition concerns in relation to the supply of road fuel in 36 areas across the UK and the supply of a specific type of fuel – called auto-LPG – in a further area.
It is concerned the merger could lead to higher prices for motorists in these locations.
Joel Bamford, senior director of mergers, said: "Our job is to protect consumers by making sure there continues to be strong competition between petrol stations, which leads to lower prices at the pump.
"These are two key players in the market, and it’s important that we thoroughly analyse the deal to make sure that people don’t end up paying over the odds.
"Right now, we’re concerned the merger could lead to higher prices for motorists in certain parts of the UK.
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"However, if the companies can provide a clear-cut solution to address our concerns, we won’t carry out an in-depth phase two investigation."
The buyers now have five working days to offer legally binding proposals to the CMA to address the competition concerns identified.
The CMA then has a further five working days to consider whether to accept any offer instead of referring the case to a phase two investigation.
A spokesperson for the Issa brothers and TDR Capital said: "We will be working constructively with the CMA over the course of the next 10 days in order to arrive at a satisfactory outcome for all parties within phase one.
"This would provide welcome certainty for our colleagues, suppliers and customers, and allow us to move forward with our exciting plans for investment and growth at Asda."
Mohsin and Zuber Issa founded their Euro Garages business in 2001 with a single petrol station in Bury which they bought for £150,000.
The business now has sites in Europe, the United States and Australia and annual sales of around £18bn.
Previous American owners Walmart, which bought Asda in 1999 for £6.7bn, has retain a small stake in the business.
The CMA's update comes after EG Group secured an agreement to buy Asda's forecourts business in a deal worth £750m.
The Issa brothers also recently swooped for fast food chain Leon, and are also close to agreeing a takeover deal for Caffe Nero.
