The retail merger of Thomas Cook and The Co-operative Travel Group is to be probed by the Office of Fair Trading.
The European Commission gave the OFT jurisdiction over the merger, which it requested last month on the basis that it relates solely to the UK.
The OFT now has 45 working days to examine the the proposed merger and decide whether it should be referred to the Competition Commission for an in-depth investigation.
The move could eventually result in a ruling against the merger or request that the companies divest some outlets.
The watchdog believes the merger of the two high street giants threatens “significantly” to effect competition in the supply of travel services via travel agency outlets in the UK.
A joint statement from the companies said: “We will continue to work closely withthe OFT to obtain a rapid clearance.”
The merged entity would become the UK’s largest travel agency chain with around 1300 stores.
Midlands Co-operative is set to take a 3.5% stake in the new entity, with Cook owning 66.5% and the Co-op 30%.
The European Commission said in a statement: “The commission’s preliminary investigation confirmed that the proposed transaction would threaten to affect significantly competition in a distinct market which is at most UK-wide.
“Moreover, the commission considers that the UK competition authorities are well placed to investigate the effect of the transaction on the national market or parts of this market.”