The Competition and Markets Authority (CMA) has provisionally cleared the anticipated £55m acquisition of 99p Stores by Poundland Group.

Following an in-depth phase two review, the regulator found that the merger was not expected to result in a “substantial lessening of competition”, meaning customers would not face a reduction in choice, value or lower-quality service as a result of the merger.

The CMA has since sought the views of Poundland and 99p Stores as well as other high street retailers, and commissioned an independent face-to-face survey of over 5,000 customers of the two merging companies.

It found that, along with Poundland, the companies are each other’s closest competitors but after the merger they would still face competition from other value retailers such as B&M, Home Bargains, Wilko and Bargain Buys, along with Tesco and Asda.

The group also found that that Poundland would not have an incentive to reduce the quality of its offering as there was only be a small overall increase in the proportion of areas in which Poundland faced no competitors. Moreover, only a third of Poundland’s stores face competition from 99p.

Philip Marsden, chair of the inquiry group, said: “There has been a significant rise in prominence of value retailers for UK shoppers. Our evidence indicates that customers are primarily attracted to Poundland and 99p because of their affordability and see them as good alternatives to each other. Nevertheless some customers can and do switch to other types of discount retail chains.

“We have also seen in recent years the big four supermarkets engaging in intense price competition, some of which involving the promotion of £1 products. On the basis of the evidence to date, we do not think customers will be worse off from the merger.”