The watchdog says that the combined business, which will be the UK’s largest pub group with almost 5,000 sites, will continue to face competition at the national level.
But it warned the deal could reduce consumer choice in 51 local areas, where the group would face limited competition.
“The CMA is therefore concerned that, if the businesses were to merge, pub goers in those areas could be faced with price increases or lower quality products and services,” the watchdog says.
The deal values Ei at almost £3bn, including debt.
The companies have until 13 December to suggest ways of overcoming the CMA's concerns, which could be through a disposal of sites.
If proposals are not offered, or do not sufficiently address the issues raised, then the merger will be referred for an in-depth Phase 2 investigation.
Ei Group says in a statement: “As invited by the CMA, the parties will put proposals to the CMA to address the concerns that it has raised. The parties are confident that these proposals will enable the transaction to be approved by the CMA without a Phase 2 referral and our expectation remains that the transaction will complete in the first quarter of 2020.”
Earlier this year the CMA put a stop to the merger between supermarket chains Sainsbury’s and Asda as it ruled it could impact the quality of products available to consumers.
It launched a formal investigation in to Amazon’s investment in restaurant delivery platform Deliveroo in October.