The two firms announced plans for an all-share deal last October that would create the world's largest online betting business by revenue.
Dublin-based Flutter owns the Paddy Power and Betfair brands, while Toronto-based The Stars Group owns Sky Betting and Gaming.
The Competition and Markets Authority said it would consider whether the tie-up would result in "a substantial lessening of competition" in Britain.
Analysts at Davy said the CMA review was expected and the timing was consistent with the timetable previously set by Flutter, suggesting the deal was on schedule to complete by the third quarter this year.
(Reporting by Iain Withers, editing by Louise Heavens)