The competition watchdog says it will oppose Carsales.com's acquisition of the Trading Post from Telstra.
Under the proposed transaction, Carsales would license the TradingPost.com.au brand and operate the website for a confidential period, with an ability to buy the brand at the end of the licence agreement.
The Australian Competition and Consumer Commission says it is concerned about the reduction of competition in the market for automotive classifieds, in which Carsales has a dominant position, and Trading Post a well-known brand.
"Trading Post is a well established and high profile brand for automotive classifieds advertising and provides an important competitive constraint on Carsales," said the ACCC's chairman Rod Sims in a statement.
"The proposed acquisition would significantly increase Carsales's market power and competition would be substantially reduced to the detriment of automotive dealerships and private advertisers." The regulator says the acquisition would not only reduce the range of choice of where to place ads for private sellers and car dealers, but would also reinforce Carsales's already dominant position in the market.
By adding a significant number of listings and audience to Carsales.com, the ACCC argues the acquisition would reinforce the virutous cycle Carsales enjoys by having the largest number of listings and audience in the market.
Carsales.com shares were down 1.3 per cent to $7.48 at 10:10am (AEDT).