(Reuters) - Britain's competition watchdog raised concerns of higher prices at pubs in 51 local areas from the potential merger of Slug and Lettuce pub owner Stonegate and rival Ei Group, which would create the country's biggest pub operator.
However, the Competition and Markets Authority (CMA) said that the merger does not raise competition concerns in the UK.
In July, Stonegate agreed to buy larger rival Ei for 1.27 billion pounds to take control of about 4,000 additional pubs.
Stonegate, which is owned by private equity fund TDR, is best known for its Walkabout, Yates and Slug and Lettuce chains, while Ei runs a disparate range of pubs, often in partnership with landlords and small operators, who tailor their menus and entertainment to cater to local customers.
The CMA, which investigated the potential impact of the merger in more than 500 local areas across the UK, said if the businesses were to merge, pub-goers in 51 areas may face higher prices and lower product quality.
British restaurant and pub operators have had to cope with lower consumer spending and higher expenses, most notably from wage inflation and property costs, following Britain's vote to leave the European Union.
The companies have until next Friday to suggest ways to overcome concerns of the CMA, the watchdog said.
(Reporting by Yadarisa Shabong in Bengaluru; editing by Uttaresh.V, Bernard Orr)
