Nine Entertainment's proposed takeover of Fairfax Media will be scrutinised by the competition regulator for 12 weeks, during which it will assess the deal's potential impact on media diversity.

Key points: The ACCC will investigate whether "the proposed merger is likely to substantially lessen competition in any market"

The ACCC will investigate whether "the proposed merger is likely to substantially lessen competition in any market" The ACCC said it would also "take a very close look" at any potential impact on diversity of views

The ACCC said it would also "take a very close look" at any potential impact on diversity of views ACMA will also consider the proposed merger but appears to have given it an early tick

The Australian Competition & Consumer Commission (ACCC) is preparing to begin a public review of the $4.2 billion takeover announced last week, in the first major media merger under new ownership laws approved late last year.

A spokesman for the ACCC told the ABC the merger review would begin once the regulator receives submissions and further relevant information from Nine and Fairfax.

"The purpose of the public review is to assess whether the proposed merger is likely to substantially lessen competition in any market," the ACCC spokesman said.

"When reviewing mergers in the media sector, the ACCC considers the competition impact on consumers (both readers and viewers), advertisers and content creators/sellers.

"The impact of technology on the media sector will be a critical part of the competition analysis."

ACCC chairman Rod Sims was unavailable to speak to the ABC, but told Guardian Australia the regulator would "take a very close look" and "a long review" into any potential impact on diversity of views.

"Our lens is: what does the reduction in competition mean for diversity? What are competitive forces doing to diversity?" Mr Sims said.

A spokeswoman for Nine said the company's submission on the proposed takeover would be lodged with the ACCC "later this month".

A Fairfax spokesman said the company would "make the submission in good time" and "in keeping with the timetable" to allow the proposed merger by the end of the year subject to regulatory and shareholder approvals.

ACMA's strong hint

In addition to the ACCC's inquiry, the Australian Communications & Media Authority (ACMA) will also consider the proposed merger.

However, in a statement posted on the ACMA's website on the day the Nine-Fairfax proposal was announced, the media regulator appeared to give it an early tick.

"Based on the information available, the ACMA considers the merger between Nine Entertainment Co. Holdings Limited (Nine) and Fairfax Media Limited (Fairfax) would be compliant with the media diversity and control rules administered by the ACMA," the statement said.

Under the proposal announced on July 26, Fairfax and Nine will become an integrated media giant across television, online video streaming, print, digital and real estate advertising.

The Fairfax brand will disappear in the proposed deal, with the combined company's name being shortened to Nine.

This deal raised concerns about editorial independence of Fairfax mastheads such as The Age, The Sydney Morning Herald and The Australian Financial Review.

Nine would become the dominant partner, with its current shareholders holding 51.1 per cent of the merged company's shares.

The current Nine chief executive and chairman — Hugh Marks and former federal treasurer Peter Costello, respectively — will lead the combined media company.

Given the lengthy timeline for approval, the possibility of a counter-offer remains, although Seven Group Holdings chief executive Ryan Stokes has played down an offer from Seven West Media.

Shares in Nine Entertainment dropped 1.1 per cent to $2.28 at 10:45am (AEST).

Fairfax shares experienced a similarly steep fall, down 1.2 per cent to 83.5 cents.

Follow Peter Ryan on Twitter @peter_f_ryan.