Ticketmaster and Live Nation's controversial merger could result in them being forced to dispose of UK operations or sell tickets through a rival after regulators warned their tie-up could damage competition and push up prices.

The Competition Commission's provisional findings on the multimillion-pound merger, published today, said that the deal would make it harder for new entrants to break into the ticketing marketplace. The commission also warned that combining the two major players in the music market could mean the price of tickets went up, or result in concert-goers receiving a poorer service.

Ticketmaster is the world's largest seller of tickets to live events, while Live Nation is the world's biggest concert promoter, with a roster of stars including U2, Madonna and Coldplay. In February the pair agreed to team up in a $800m deal .

Bruce Springsteen was one of the earliest opponents of the merger, warning that it would create "a near-monopoly situation".

In the US the deal is being probed by the department of justice. In the UK, the planned merger was referred to the Competition Commission by the Office of Fair Trading in June because of concerns about its impact on the £1.9bn-a-year live music market.

The regulator came to its preliminary ruling after considering the case of CTS Eventim, which is the second-largest ticket vendor behind Ticketmaster. It landed a major deal to sell tickets to Live Nation events in December 2007. But the commission concluded that if the merger went through, Live Nation would seek to block CTS's development in Britain.

"We believe that, if the merger proceeds, Live Nation will seek to limit its relationship with CTS, with the effect of putting CTS's future prospects in the UK in considerable doubt," said Christopher Clarke, deputy chairman of the commission, who led the inquiry into the deal.

Both Ticketmaster and Live Nation are based in the US, which means the commission cannot block the whole deal. However, it could insist that one or other of the parties sells its UK operations, or sells a proportion of tickets through a rival such as CTS.

The Competition Commission is seeking comments on its provisional findings, and plans to issue a final report on 24 November after it has considered "a range of possible ways to address the loss of competition".

Live Nation and Ticketmaster said that they respected the commission's work, but insisted they were still committed to a merger. Outside the US and UK, the deal would affect operations in 13 markets worldwide. Regulators have become involved in only two of those – Turkey and Norway – and in both instances the deal was approved. The companies said today they were confident their merger will ultimately go ahead.

"We firmly believe that our merger achieves an important and much needed public interest, and remain optimistic that it will ultimately be approved," they said in a statement.

They painted a bleak picture of the music industry, portraying themselves as potential saviours.

"The recording industry is a shell of its former self. Where the recording industry was once the economic engine for the music business, it is live entertainment that is now the future of the music industry.

"We believe this merger will build a more efficient and effective company moving forward, and that working together we will be able to help achieve needed change that will strengthen a flagging music industry."

But the Competition Commission warned that the merger could result in "lower levels of innovation".

Rivals have applauded the ruling. Seatwave, the UK-based reseller of tickets, claimed it was "great for fans".

"Clearly, the Competition Commission believes that more choice in the market leads to lower ticket prices for fans," said Joe Cohen, Seatwave's chief executive.