By Natalia Drozdiak 

BRUSSELS-- Bayer AG's $57 billion acquisition of Monsanto Co. will undergo an in-depth investigation by the European Union on concerns that the creation of an agrochemicals powerhouse could hurt farmers, throwing into doubt the companies' plans to complete the tie-up by the end of the year.

The European Commission, which has antitrust powers in the EU, on Tuesday said it aimed to complete its review by Jan. 8, 2018, but that date could be pushed back if there are delays or extensions. Regulators rarely complete their analyses well in advance of set deadlines.

The commission said it was concerned the deal would lead to higher prices, lower quality, limited choice and less innovation in the markets for pesticides, seeds and for plant genetic traits, which can be developed in laboratories and introduced in some varieties of plants.

"We need to ensure effective competition so that farmers can have access to innovative products, better quality and also purchase products at competitive prices," said EU antitrust chief Margrethe Vestager.

Bayer and Monsanto have already submitted commitments to the EU in a bid to win approval, according to the regulator. But the EU deemed them insufficient to assuage its concerns.

A review by U.S. regulators is ongoing. Bayer earlier this year said it had received requests for information from the U.S. Department of Justice.

Advanced probes are common in complex mergers. A full-blown review allows companies several more months to come up with additional remedies. The commission could still clear the deal with or without conditions, or block it if it still deems those remedies inadequate.

The deal is the last in a batch of three major mergers that are set to reshape the industry. Companies in the sector have raced to merge as declining prices for crops weigh on profit.

The EU has already cleared Dow Chemical Co. and DuPont Co.'s planned merger, as well as China National Chemical Corp.'s roughly $43 billion takeover of Swiss seed and pesticide maker Syngenta AG. In both cases, the companies had to make considerable concessions.

Still, that leaves Bayer and Monsanto seeking approval in an already consolidated industry, which could require them to offer more extensive remedies, like selling a wider array of assets than expected.

Germany's Bayer in May agreed to shed its glufosinate herbicide business along with related crop genes that render plants impervious to the chemical as a condition for approval from South African competition authorities. It is unclear to what extent these remedies differ from those offered to the EU.

Bayer is also looking to divest some cotton and canola seed units, according to people familiar with the discussions. Shedding those assets could potentially address some of the EU's issues.

In a statement, Bayer said it "looks forward to continuing to work constructively with the commission with a view to obtaining the commission's approval of the transaction by the end of this year."

In spelling out its concerns, the EU said the two companies both have high market shares in breeding or licensing--and in some cases both--vegetable, canola and cotton seeds.

The EU also noted the two companies were the only firms among a limited number of competitors capable of discovering new active ingredients and new formulas, such as those that could tackle the problem of growing weed resistance to existing herbicides.

If regulators approve the deal, the Bayer would inherit Monsanto's market-leading position in seeds and crop genes. That would tilt Bayer heavily toward agriculture in a long-range bet on high-tech crops.

The deal has faced a backlash in Europe from environmental groups, farmers and some lawmakers on concerns it would cement the control by three companies of the world's agrochemicals and seeds supply.

In an unusual step, the EU said it had been "petitioned through emails, postcards, letters and tweets expressing concerns about the proposed acquisition of Monsanto by Bayer." The commission said its mandate was to assess the merger solely from a competition perspective and that the other concerns raised would be subject to European and national rules.

The deal earlier this year received an apparent show of support from the White House after Bayer Chief Executive Werner Baumann in a meeting with then President-elect Donald Trump committed to investing in the U.S. and maintaining American jobs.

The deal boom in the agriculture sector has prompted concerns in farm states, drawing scrutiny even from Republican leaders often skeptical of government intervention.

Jacob Bunge in Chicago contributed to this article.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

(END) Dow Jones Newswires

August 22, 2017 11:23 ET (15:23 GMT)