The UK Competition and Markets Authority (CMA) has proposed an in-depth Phase II investigation on the merger of SSE Retail and Npower due to competition concerns.

The government agency has taken this decision after both the companies failed to offer any measures to address competition concerns identified during the initial Phase I investigation.

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The Phase I investigation identified that the deal could reduce competition, potentially leading to higher prices.

"We look forward to continuing to work constructively with the CMA as it undertakes its detailed investigation.."

A group of independent panel members supported by a case team of CMA staff will take a decision on the merger and submit a final report on 22 October this year.

SSE Retail CEO Alistair Phillips-Davies said: “We look forward to continuing to work constructively with the CMA as it undertakes its detailed investigation.

“A Phase II referral is a well-established process for transactions of this nature and we remain confident that the proposed merger will deliver benefits for customers and the energy market as a whole.

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“The formation and listing of the new company remains on track for completion in the last quarter of 2018 or the first quarter of 2019.”

In November last year, Germany-based innogy entered into an agreement with SSE Retail to merge its British retail business, npower, with SSE’s household energy and energy services business.

The merger is aimed to establish an independent retail energy company in the country.

A 34.4% stake in the combined retail entity will be owned by innogy and the remaining 65.6% stake will be demerged to SSE’s shareholders following the completion of the transaction.