The Competition and Markets Authority (CMA) has provisionally accepted Co-op Group’s plans to sell 15 convenience stores and two funeral homes as part of its proposed merger with Southern Co-op.

The watchdog said the proposed disposals could address competition concerns identified during its phase one investigation into the deal. This potentially could allow the transaction to avoid a more in-depth phase two investigation.

The CMA had raised concerns that the merger could reduce competition in local areas surrounding nine Co-op Group stores and 10 Southern Co-op stores, as well as one funeral care outlet operated by each business.

Both businesses accepted the concerns and asked the CMA to fast-track the investigation by offering undertakings in lieu of a full phase two probe.

Under the proposed remedies, 15 convenience stores and two funeral homes would be sold to address the competition issues. The CMA said it had provisionally found that the proposed sales in each affected local area could resolve its concerns.

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The regulator will now consult third parties and assess potential buyers before making a final decision on the remedies. If it concludes that the undertakings adequately address the competition concerns, it will conditionally clear the merger.

CMA executive director for mergers Joel Bamford said the regulator was concerned the transaction could reduce competition for convenience shoppers and people arranging funerals in several areas of southern England.

The Co-op Group completed its acquisition of Southern Co-op on 26 July, with Southern continuing to operate as a separate business while the CMA review progressed.

Southern Co-op operates more than 300 food, funeral and Starbucks branches across southern England, while Co-op Group has more than 2,300 food stores and around 800 funeral homes.

The proposed merger was approved by Southern Co-op members earlier this year, with the businesses describing the deal as a move towards a larger co-operative organisation with greater scale and resilience.

The latest CMA decision represents a key step towards completing the regulatory process, although final approval remains subject to the watchdog’s consideration of the proposed disposals.