The Competition and Markets Authority (CMA) has blocked the potential takeover of ClearScore by Experian on the grounds that it would harm competition in the credit scoring market.

The proposed Experian ClearScore merger could ‘stifle product development and impact customers’ in the credit scoring sector, said the CMA.

The ‘Phase 2’ investigation provisionally found that Experian’s takeover of ClearScore was likely to result in less intense competition, potentially harming the continued development of digital products which are intended to help people understand their personal finances.

The CMA referred the proposed Experian ClearScore merger for an in-depth investigation in July 2018, following initial concerns that the deal could have a negative impact on the services provided to customers.

Experian and ClearScore are the two largest credit checking firms in the UK. Experian offers both free and paid-for credit checking services, while ClearScore, which entered the market in 2015, quickly became the market leader in free credit checking tools for customers. Both companies also provide people using these services with comparisons of third party lenders such as credit card providers and banks.

The CMA concluded that currently, competition between the firms was helping to drive quality and innovation in both free and paid-for credit checking services as they develop their products to vie for customers. By taking one of the firms out of the market, the CMA’s provisional finding were that the merger would substantially reduce the pressure to continue to develop innovative offers and to make other improvements in services.

Roland Green, the inquiry chair, said: “Our investigation has shown that this is a fast-paced and evolving market, and that both Experian and ClearScore are an important part of that. The provisional findings in our investigation show that Experian’s proposed takeover of ClearScore is likely to weaken competition in the sector and have a negative effect on the services offered to customers.”

The CMA is now asking for views on these provisional findings by 19 December 2018 and will assess all the evidence before making a final decision. The statutory deadline for the CMA’s final report is 11 March 2019.