The UK’s competition regulator is threatening eBay’s planned $9.2bn deal with Norway’s Adevinta to create the world’s largest online classifieds ads group.

The deal, announced last July, would combine eBay’s classifieds business, including its Gumtree site, with Adevinta-owned Shpock in the UK, which the Competition and Markets Authority said “could lead to a loss of competition”.

The two companies have just a week to come up with potential remedies before the CMA escalates its investigation to the next stage. The CMA’s remedies in an in-depth “Phase 2” investigation include prohibiting the deal outright if the two companies do not agree action to tackle its concerns.

“While eBay and Adevinta do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution,” the two companies said. “Adevinta and eBay will together propose legally binding solutions to resolve the CMA’s competition concerns before the deadline of 23 February 2021.”

Only last week Adevinta, which was spun out of Norwegian media company Schibsted in 2019, said it had made “good progress” towards the deal closing by the end of March. Adevinta reported that revenues were flat at €200m in the fourth quarter of what it called a “troubled year” in 2020. The 4 per cent growth in classifieds was outweighed by a 6 per cent drop in display advertising revenues, as listings for property, jobs and cars came under pressure during the pandemic.

Its deal with eBay would involve the Silicon Valley-based ecommerce group taking a 44 per cent equity stake in Adevinta, including a third of the voting rights and two board seats. Ebay would also receive $2.5bn in cash.

The CMA said it was concerned that eBay could therefore “influence the business strategy” of the combined group, which would be the world’s largest online classified ads business. The deal also means Gumtree would not be an “independent competitor to eBay’s marketplace”, the regulator said, and leaves Facebook’s Marketplace as its only remaining significant competitor.

“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,” said Joel Bamford, senior director of mergers at the CMA. “There is a realistic chance that without this deal, Gumtree and Shpock would have been direct competitors to eBay, which is by far the biggest player in this market.”

Ebay began the sale process after coming under attack from activists to focus on its core business. As well as Gumtree, the unit includes Canada’s Kijiji and online vehicle marketplaces in Denmark, Germany, Italy and the UK, such as motors.co.uk.

If the deal goes ahead as planned, the merged classifieds group would serve 1bn people in 20 countries, receiving 3bn monthly visits and would have generated an estimated $1.8bn in revenues in 2019, Adevinta said in July.