The UK competition watchdog has launched an investigation into Uber’s acquisition of the taxi technology company, Autocab, over fears the tie-up could limit competition in the market for ride-hailing software.

Autocab, which struck the deal with Uber in August last year, provides taxi operators with booking and dispatch software and connects drivers with trips via an online marketplace.

On Friday, the Competition and Markets Authority said it had launched a formal probe into the deal and would consider its “possible effect on competition, including in the supply of booking and dispatch software to taxi companies in the UK, and any potential impact upon consumers”.

The watchdog has until March 26 to decide whether it wants to clear the deal, demand actions from the companies, or enter into a more in-depth investigation. It is seeking feedback until February 12.

In August, Uber said its purchase of Autocab would enable it to begin offering rides to customers in areas that it did not previously cover. It added that it would explore using Autocab’s platform to provide drivers with additional revenue opportunities such as food delivery.

Autocab chief executive Safa Alkateb said the company would remain independent despite the tie-up, with its own board focused exclusively on providing technology to the taxi and private hire industry.

On Friday, Uber said: “We are co-operating fully with the [CMA’s] inquiry to ensure it can conclude its review as quickly as possible. We are confident that this acquisition is positive for consumers, will help local operators grow and provide drivers with genuine earning opportunities.”

The CMA’s announcement follows news on Thursday of an investigation into Facebook’s acquisition of online image platform Giphy. The regulator has become increasingly focused on the potential harms stemming from digital mergers, including so-called “killer acquisitions”, in which big players buy up start-ups in order to nullify competition.

The probe into Uber comes at a difficult time for the ride-hailing app, which has suffered a decline in taxi rides during the global pandemic. The company also faces intensifying competition in the London takeaway market from Just Eat, which pledged to make life “very very complicated” for it in January.