There are already several significant buying groups, including Hardware & Building Traders (HBT) and Natbuild National Building Suppliers Group, which have both benefited from the uncertainty in the independent hardware sector since Woolworths and US partner Lowe's signalled their intention to exit hardware and sell both HTH and the Masters Home Improvement operation.

Sources close to Metcash argue a merger of HTH and Mitre 10 is the only way to challenge the dominance and price-setting power of market behemoth Bunnings but the ACCC has also listened to retailers concerned the contraction of the wholesale market could hurt their capacity to effectively negotiate.

Mr Featherston said some retailers were also concerned Mitre 10 might favour its corporate stores over its franchised outlets and the ACCC had extracted an undertaking to "prevent any such discrimination".

The merged Mitre 10-HTH business would bring in annual sales of over $2 billion but it would also have about 100 corporate-owned stores and reduce the wholesale hardware market from two players to one.

The ACCC will now seek feedback from the broader hardware sector before making a final decision on whether to accept the negotiated undertakings and ultimately whether to give the green light for the acquisition of HTH.