The Competition and Markets Authority has announced it will investigate the awarding of the East Midlands rail franchise to Abellio.
The transport giant, which has promised millions of pounds of improvements in stations and trains, was named the new franchisee in April and is due to begin in August.
But current franchisee Stagecoach launched legal action over the decision, announced by the DfT, .
The company said it was shortlisted but later disqualified from the competition for submitting a non-compliant bid, principally to do with pension risks.
The group claims bidders were asked to take responsibility for the funding risk of the railways pension scheme, at a time when the pensions regulator voiced doubts over it.
East Midlands business news
The Competition and Markets Authority announced on Friday, June 21, it was now investigating the award.
A statement from the regulator said: "The Competition and Markets Authority (CMA) is considering whether it is or may be the case that this transaction if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
"To assist it with this assessment, the CMA invites comments on the transaction from any interested party."
Most Read
The announcement has come on the same day Abellio, which also runs the Greater Anglia franchise and ScotRail, announced a new brand for the franchise - EMR, which stands for East Midlands Railway.
The operator, which plans to invest millions of pounds in train and station improvements, also revealed its trains will have new purple and white branding that will gradually be applied to all trains and stations.
Stewart Fox-Mills, Abellio’s commercial director, said: "We are investing £600 million on improving the railway across the East Midlands and this will include a striking new and durable brand for our new East Midlands Railway.
"It is the first demonstration of our commitment to deliver a long-term step change in the quality of rail service in the East Midlands."