The sale of AH Marks to farm chemicals giant Nufarm has been referred to the Competition Commission after the Office of Fair Trading said there was a risk the Australian firm could charge "near-monopoly" prices in the UK.

After completing the deal in March – part of an expansion drive in the UK and the US – Nufarm said it would increase production at the AH Marks site in Wyke, Bradford.

But the acquisition was not notified to the OFT, the government agency said.

The two firms are the leading suppliers to the UK of two phenoxy acetic acids, which are used to make herbicides which farmers use in protecting against weeds.

The OFT said it was not convinced that enough farmers would switch to other herbicides if there was an increase in the price of products based on Nufarm's chemicals and that there was just one other supplier in the UK in competition with Nufarm.

Simon Pritchard, OFT senior director of mergers, said: "Nufarm was perfectly entitled to take the risk of completing this acquisition and integrating the UK businesses. For the OFT, however, protecting UK customers and consumers comes first, and while we take no satisfaction from the inevitable disruption, we will not hesitate to intervene whenever necessary.

"While the markets here are not large, the merger's impact is significant, with customers potentially exposed to near-monopoly prices, and the deterrent effect on future mergers that could result in monopolies is also an important consideration for us.

"As such, the Competition Commission has a valuable job to do in giving this merger thorough scrutiny."

John Austin, country director UK and Ireland for Nufarm UK, said: "Nufarm is surprised with this decision but remains very confident that the acquisition of A H Marks helps deliver important benefits to both distribution and grower customers.

"The company will work co-operatively with the Competition Commission – as it has with the OFT – to clarify and address any relevant issues that remain to be investigated."

The Competition Commission has invited interested parties to submit evidence and said it expects to report by February 12 next year.