Bloomberg News is reporting on its website that EU regulators have told BHP Billiton lawyers that the proposed takeover may breach competition law.
The report cites two unnamed sources close to the case saying regulators are set to issue a statement of objections outlining concerns that a merged company would have a bigger share of the global iron ore market that could lead to price hikes for the commodity.
BHP Billiton shares are down 8.44 per cent, or $2.30, to $24.95 at 11.41am (AEDT).
Rio Tinto shares are down 14.92 per cent, or $11.70, to $66.70.
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