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Toddler tablet maker VTech’s takeover of rival Leapfrog faces a possible full-blown investigation in the UK over competition concerns following the deal.

An initial inquiry by the Competition and Markets Authority (CMA) found the takeover leaves little competition in Britain for children’s electronic learning toys, with VTech and Leapfrog being two of the three largest suppliers in the market.

The CMA raised fears the deal may lead to a “substantial lessening of competition in the market”, which could push up prices and lead to less quality or choice for consumers.

It added that without the tie-up, both firms would have been close competitors in the supply of child electronic reading systems, with audio narration accompanying a physical book.

Hong Kong-based VTech snapped up US firm Leapfrog Enterprises for 72 million US dollars (£55 million) in April, bringing together two of the biggest names in children’s electronic toys.

VTech now has until August 25 to put forward proposals to allay the CMA’s concerns. “VTech and LeapFrog are two of the largest and best known brands supplying electronic toys and learning products for children. Retailers see them as close rivals and rely on competition between the companies to keep prices down.

“We are concerned that the merger could lead to prices rising, the quality of products going downhill or the range on offer being reduced.” She said unless VTech can address its concerns, the merger warrants an “in-depth investigation

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