EBay’s sale of Gumtree to Shpock owner Adevinta could lead to “higher prices and less choice”, says the Competition and Market Authority.
Under the terms of the £6.5bn deal, eBay is to get a 33.3% voting stake and a seat on the board of its rival.
The CMA is concerned that eBay will have influence over both businesses.
“Without this deal, Gumtree and Shpock would have been direct competitors to eBay,” said Joel Bamford, senior director of mergers at the CMA.
“It is important that people have choice when it comes to selling items they no longer require or searching for a bargain online, and that they can enjoy competitive fees and services,” he added.
The sale was agreed last July when Adevinta beat rival bidders, including Naspers and Prosus, even though they offered eBay more cash as part of their bids.
After reviewing eBay’s internal documents at the time when the decision was made to sell, the CMA said there would have been a realistic chance that eBay would sell Gumtree to a different purchaser without retaining its influence.
That would have resulted in Gumtree becoming an independent competitor to eBay’s marketplace.
Adevinta’s Shpock and eBay’s Gumtree are both UK online classified advertising platforms.
Both of them allow people to sell items – used or new goods such as clothing, electronics and furniture – to other local people.
Shpock was set up in 2014 as “the boot-sale app” and says it has about 12 million monthly active users.
Gumtree was launched in 2000 by two City traders who sold it to eBay five years later. It says it is now used by 14 million people every month.
Both are free to use, but allow advertisers to pay a fee for more prominent listings.
Meanwhile, the biggest marketplace for people to sell used and new goods to each other is eBay, which charges a fee for listings.
The CMA is concerned the merger could lead to a loss of competition, with only Facebook Marketplace remaining as a significant competitor.
It warns that this could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online.
“This is the latest in a series of merger probes by the CMA involving large digital companies, where we are thoroughly examining deals to ensure that competition is not restricted and consumers’ interests are protected,” said Mr Bamford.
The regulator has given the companies a week to offer legally binding solutions to the CMA’s competition concerns.
If they fail to come up with solutions, the CMA could refer the deal to an in-depth investigation.