A proposed merger of Australia’s largest on-street parking providers has been called into question by the competition watchdog, emboldening industry critics who claim the deal – if approved – will lead to increased council rates and deteriorating services.

The Australian Competition and Consumer Commission (ACCC) is reviewing a proposal that would allow Orikan Group – a supplier of parking sensors, licence plate recognition technology and mobile payment parking meters, largely to local councils – to buy Duncan Technologies, which supplies parking meters and enforcement software to councils and car park operators.

Orikan and Duncan, the country’s largest suppliers of on-street parking equipment, often compete for local government tenders. Rival companies estimate that between them the two hold at least 70 per cent of the parking payment and enforcement market, with a handful of smaller suppliers forming the rest of the national market.

The ACCC raised concerns over the proposed merger last week, three months after beginning a review of the deal, finding that other suppliers were “unlikely to provide a meaningful competitive constraint” to the proposed Orikan takeover, which could lead to the collapse of smaller services and reduced incentive to develop “best in breed” products.

“We are concerned that the proposed acquisition would substantially lessen competition in the market for end to end on-street parking solutions as Duncan is the primary competitor to Orikan,” ACCC commissioner Dr Philip Williams said.

Among rivals distressed by the proposal is Vehicle Monitoring Systems (VMS), which relies on Duncan to sell its primary product to the Australian market and argues that the merger would see this channel disappear overnight.

VMS managing director Saxon Hill also raised concerns that the merger could result in increased ratepayer fees if councils had to negotiate with a company strengthened by a commanding market share.

“The entity that’s dominant in local tendering will be in a very strong position when setting prices,” Hill said. “By making councils pay more, it also affects consumers, because consumers are ratepayers.”