Liqui-Box’s merger with DS Smith could negatively impact food and drink suppliers’ packaging if it goes ahead, according to the Competition and Markets Authority (CMA).

The UK authority for competition and consumer law opened the investigation into Liqui-Box’s proposed takeover of DS Smith’s rigid and flexible packaging business on 24 May 2019.

Findings from the Phase 1 investigation showed that the specialist packaging firms are among four major companies in the UK that offer the specialist Bag-in-Box type packaging for food, wine, dairy and drink suppliers.

The CMA said that if the transaction is allowed, the collaboration could reduce competition in the supply of these products. Consequently, customers could have less choice, resulting in them paying higher prices given how few large suppliers operate in the UK.

It is examining whether the proposed transaction will form a relevant merger situation under the provisions of the Enterprise Act 2002, as well as considering if the creation of that situation may lessen competition in the UK for goods or services.

The regulatory body said that the reduction in competition could also lead to lower quality products and poorer service.

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Should the two companies fail to address the CMA’s concerns, the proposed transaction will be referred for an in-depth, Phase 2 investigation. A group of independent CMA panel members will carry out the Phase 2 investigation.

A detailed investigation will be launched unless the parties offer acceptable solutions to address the competition concerns.

After launching the investigation into the planned merger, the CMA invited comments from interested parties from 24 May 2019 to 10 June 2019.

It announced the decision last week following the completion of the Phase 1 investigation.

Liqui-Box offers complete solutions for liquid packaging needs globally, while DS Smith provides corrugated packaging solutions in 37 countries.