Sydney drivers could ultimately be the losers if Transurban buys the controversial WestConnex project, the competition watchdog says.
Australian Competition and Consumer Commission chairman Rod Sims says it's concerned Transurban's acquisition of the multibillion-dollar toll road could stymie competition.
The company already controls seven of the nine existing toll roads in NSW.
"We are concerned that the proposed acquisition may cement Transurban's advantages when competing for future toll roads," Mr Sims said in a statement on Thursday.
"We consider that Transurban already has significant incumbency advantages when competing for future toll road projects."
The WestConnex motorway aims to improve connectivity between western Sydney and the city's CBD.
Mr Sims said the $16 billion motorway provided an opportunity for a rival bidder that could improve competition in NSW.
"An alternative owner of WestConnex might lower tolls for certain trips or make changes to its roads or services to ease traffic congestion in attempts to attract more vehicles away from Transurban roads," he said.
"Those two players would likely compete strongly for future toll road projects and vie for government approval for unsolicited road proposals."
NSW Treasury said the sale of a 51 per cent stake in the motorway was a "competitive process", with several strong consortiums involved in the bidding.
A department spokesman noted all bidders must seek regulatory approval from relevant bodies, including the ACCC.
Labor roads spokeswoman Jodi McKay, who wrote to the ACCC with concerns over the deal in January, said the government must suspend the sale of the motorway until the commission's findings are delivered.
"This preliminary finding has confirmed our concerns and we await the ACCC's final view," Ms Mckay said in a statement.
"Monopolies are never good for the end consumer and toll roads are no different."
In a statement issued to the ASX, Transurban stressed the ACCC had only identified issues that "may" cause concern.
"The ACCC has not identified any 'issues of concern'," the statement said.
Transurban chief executive Scott Charlton said his company would continue to work with the ACCC to help the commission complete its review.