(Reuters) -Britain's competition watchdog said on Monday it will launch an investigation into the proposed merger between U.S.-based Getty Images ( GETY ) and rival Shutterstock ( SSTK ) after remedies offered by the companies failed to address its concerns.

Getty and Shutterstock ( SSTK ) offered a "complex package of remedies" late in the Phase 1 investigation, but the regulator said these did not fully address concerns the deal could lead to higher prices and lower quality editorial and stock imagery.

Getty shares fell over 7% while Shutterstock ( SSTK ) dropped 2% in U.S. premarket trading.

The Competition and Markets Authority (CMA) said it had heard concerns from businesses, trade associations and industry stakeholders including the News Media Association over the merger of the world's largest photo licensing platforms.

Getty Images ( GETY ) said in a statement it had offered comprehensive remedies to avoid a Phase 2 review and was disappointed by the CMA's decision, while both companies said they remain committed to the merger and will continue engaging with the regulator.

The CMA said in late October the merger could substantially harm competition in editorial and stock photography markets and reduce service quality for UK media organisations and creative businesses.

Getty and Shutterstock ( SSTK ) struck a $3.7 billion deal in January to form a stock-image powerhouse at a time when generative AI tools are increasingly disrupting the industry.