The merger of Uber's operations in Southeast Asia with those of rival Grab may have broken competition law and could be reversed, a Singapore regulator said Thursday.

Grab's acquisition of Uber's operations in Singapore in March has "led to a substantial lessening of competition" in the city-state, the Competition and Consumer Commission of Singapore said in a provisional decision.

The merged ride-hailing company has already increased prices since the deal went through, the commission said.

The companies have two weeks to respond to the decision, which could deal a big blow to Uber's attempt to withdraw from Southeast Asia in order to focus on other markets.

Grab said it disagrees with the commission's findings, which it argued define competition too narrowly.

The regulator "has not taken into account the dynamic developments and intense competition going on over the past few months, from both new and incumbent taxi and ride-hailing players," the company said in a statement.

Related: Uber quits 8 countries in Southeast Asia, selling out to rival Grab

The regulator proposed potential remedies. But it said if Uber and Grab fail to address the concerns about competition, they may have to "unwind" the merger. It also threatened them with financial penalties.

"This provisional decision and proposed remedies are overreaching and go against Singapore's pro-innovation and pro-business regulations," Grab said, adding it "will take all appropriate steps to appeal against this decision."

An Uber spokeswoman referred a request for comment to Grab.

Under the deal, Uber received a 27.5% stake in Grab — worth several billion dollars — in exchange for the US company's operations in eight southeast Asia countries.

The deal has also come under scrutiny from regulators in the Philippines and Malaysia.