By Noor Zainab Hussain
(Reuters) - Britain's competition watchdog indicated it may block credit data company Experian's (L:EXPN) takeover of rival ClearScore and warned the deal could stifle innovation and lead to people paying more for credit cards and loans.
Experian, the world's biggest credit data firm, said it was disappointed by the Competition and Markets Authority's (CMA) provisional findings.
The CMA said its Phase II investigation had found the merger would potentially harm the development of digital products that help people understand their personal finances.
"At this stage, the CMA's view is that the only effective remedy is prohibition of the merger," the watchdog, which is yet to decide possible remedies, said in a statement.
Experian, which had chosen not to offer proposals to address the regulator's concerns, said it would engage with authorities ahead of the publication of the CMA's final report early in the new year. The statutory deadline for the final report is March 11, 2019.
The company did not provide comments beyond the statement. ClearScore could not be reached for comment.
Experian, a FTSE 100 company, wants to expand in Britain with the purchase of ClearScore, which provides free access to credit reports and scores, and introduces consumers to personal financial products.
For a graphic on Experian investors cheer proposed ClearScore deal, see - https://tmsnrt.rs/2PWOKqU
"That's not a final decision, and it sounds like Experian hasn't given up hope of getting the deal through in some form, but it'll be an uphill struggle, and it's difficult to imagine the CMA will move that significantly," said Nicholas Hyett, equity analyst at Hargreaves Lansdown (LON:HRGV).
The CMA has implied that there is no action Experian and Clearscore can take that will resolve its concerns about the loss of competition, Hyett added.
The watchdog had said in July that it would open a more in-depth probe into the acquisition after Experian chose not to offer proposals. The watchdog had found that Experian and ClearScore were the two top credit-checking firms in Britain and compete with each other.
CMC Markets analyst David Madden said the CMA might ask both companies to provide information that proves customers will not be put at a disadvantage should the takeover proceed.
"It is a little worrying that Experian did not address the concerns that the CMA outlined previously, and that might diminish the possibility of the deal being greenlit," Madden added.
Experian and its rivals - Equifax Inc (N:EFX) and TransUnion (N:TRU) - generate credit reports and scores based on consumers' borrowing and payment habits, including bankruptcies and court judgements.