The new owner of 115 former Safeway stores in Britain has been warned it may have to sell off some of them.
The Competition Commission has told Somerfield, which acquired the convenience stores from Safeway owner Morrisons last year, faces substantially reduced competition in 14 areas.
It said this could result "in higher prices or reductions in quality, range or service".
Somerfield and other interested parties now have until August 16th to respond to the report before the Competition Commission delivers its final verdict.
Inquiry chairman Christopher Clarke said: "We believe the only effective means of restoring competition in these areas is for the identified stores to be sold to a suitable grocery retailer who will offer choice and actively compete in the relevant local markets."
Somerfield, which completed the transfer of the stores in March, is in the middle of a three-year programme to refurbish the sites.
It said: "Somerfield notes the provisional findings of the Competition Commission and will be making further representations both in writing and at the remedies hearing in early August."