ArcelorMittal, the world's largest steelmaker, reached a 1.8-billion-euro ($2.1 billion) deal to acquire Europe's biggest capacity steel plant in June. The loss-making plant in Taranto in Italy's south is grappling with a serious pollution issue.
The European Commission opened a full-scale investigation on Wednesday, voicing worries that the merger might reduce competition in some flat carbon steel products and result in higher prices, especially for customers in southern Europe.
"Those European industries need access to steel at competitive prices to compete in global markets," European Competition Commissioner Margrethe Vestager said in a statement.
The Italian government said there was a lot of material for the Commission to deal with.
"We are absolutely confident that this second phase of the investigation will be concluded quickly," Deputy Industry Minister Teresa Bellanova, who is following the Ilva dossier, told Reuters.
ArcelorMittal, based in Luxembourg, said it would work constructively with the EU enforcer to gain approval for the deal "in a timely manner".
The Commission said concessions offered by ArcelorMittal last month failed to address its concerns, without providing details about the proposals. It will rule by March 23 whether to clear or block the deal.
Italian authorities are keen to keep the deal to save more than 10,000 jobs ahead of general elections due early next year.
($1 = 0.8628 euros)
(Additional reporting by Massimiliano Di Giorgio in Milan; editing by Francesco Guarascio and Mark Heinrich)
By Foo Yun Chee