An $11 billion merger of two of Australia's biggest gaming companies is facing a potential setback after the national competition watchdog filed a fresh legal challenge.

The proposed merger of Tabcorp and Tatts won crucial regulatory approval in the Australian Competition Tribunal in June, in a decision that dismissed a litany of concerns about the merged entity's inflated market power and angered rival betting companies.

The Australian Competition Tribunal had only one condition on its approval of the Tabcorp-Tatts merger. Credit:bradleyphotos.com.au

The Australian Competition and Consumer Commission (ACCC), which had objected to the merger because it believed it would diminish competition, announced on Monday it had applied to the Federal Court for a "judicial review" of the tribunal's decision to approve the bid.

"The ACCC is alleging the tribunal made three reviewable errors," ACCC chairman Rod Sims said.