Britain's competition body has ruled against the proposed transfer of P&O's Liverpool-Dublin ferry route to Stena, on the grounds it would substantially lessen competition in the freight market.

After a three-month investigation, the Competition Commission said the transfer would lead to increased prices for customers of freight ferry services.

"There would be scope for Stena post-merger to exercise market power, for example by increasing prices to certain customers. This would be possible given the lack of pricing transparency in the market," said a spokesman for the commission.

The prospect of fresh competition on the route in the next two to three years was unlikely, according to the commission.

"The commission did not expect that this substantial lessening of competition would be offset by other competitive constraints, in particular by entry into this market by other operators," the spokesman added.

The regulator investigated the proposed acquisition by Stena of five vessels and related assets operated by P&O on the Liverpool-Dublin and the Fleetwood-Larne routes on the Irish Sea.

However, it approved a transfer between the operators on the Fleetwood-Larne route.

The watchdog raised the possibility of approving the Dublin-Liverpool deal with certain amendments.

"The commission has been considering possible remedies," said the spokesman, adding that it would shortly publish details of the remedies.

P&O said it would review the decision and continue its discussions with the commission.