The £155m merger between Danish dairy group Arla and Express Dairies has been referred to the Competition Commission by the Office of Fair Trading.

Competition minister Gerry Sutcliffe said the deal “gives rise to a significant prospect of a substantial lessening of competition”.

The proposed merger would create Arla Foods and reduce the number of milk suppliers from four to three. The new company would then becomes the UK’s biggest fresh milk supplier with 38% of the market.

Any deal will be on hold until the CC delivers its report on September 24, 2003.