Ladbrokes and Gala Coral may have to sell hundreds of stores to allow a merger to go ahead, the competition regulator has warned.
Ladbrokes and Gala Coral are the UK's second and third largest High Street bookmakers. And the Competition and Markets Authority (CMA) is concerned that a merger between the two - worth an estimated £2.3 billion - could restrict competition and result in less favourable odds for customers.
The CMA said "for the merger to be conditionally cleared", between 350 and 400 stores may have to be sold.
Between them, Ladbrokes and Gala Coral operate around 4,000 betting shops in the UK and Northern Ireland. The merger would make the combined company larger than William Hill.
Martin Cave, chair of the CMA's inquiry into the merger, said: "We've provisionally found that the merger between two of the largest bookmakers in the country may be expected to reduce competition and choice for customers in a large number of local areas.
"Although online betting has grown substantially in recent years, the evidence we've seen confirms that a large number of customers still choose to bet in shops - and many would continue to do so after the merger.
"For these customers, competition comes from the choice of shops in their local area and it's they who could lose out from any reduction of competition and choice."
Ladbrokes shares rose 7% after the CMA's response was published.