Mumbai: Mining giant BHP Billiton Ltd moved a step closer to acquiring rival Rio Tinto with the Australian Competition and Consumer Commission approving its proposed $114 billion hostile bid, announced nearly a year ago.

BHP's acquisition of Rio Tinto, which in turn last year made a $38 billion takeover of Alcan, could create a $220 billion mining giant that would dominate the mining sector and vie with Brazil's Cia Vale do Rio Doce as the world's largest supplier of iron ore.

''While significant concerns were raised by interested parties in Australia and overseas, the ACCC found that the proposed acquisition would not be likely to substantially lessen competition in any relevant market,'' ACCC chairman Graeme Samuel said in a statement.

The commission also referred to the role steelmakers were playing in consolidating the industry – Australian steelmaker Midwest Corp was recently taken over by Chinese state-owned trading firm Sinosteel.

''The ACCC's inquiries indicated that the merged firm would be unlikely to limit its supply of iron ore given the uncertainty it would face in relation to the profitability of this strategy and the risk that limiting supply would encourage expansions by existing and new suppliers as well as sponsorship of alternative suppliers by steel makers,'' Samuel said.

BHP has addressed the main concern of the Australian watchdog about the impact the merger by entering into a long-term supply contract with the country's steel makers.

ACCC's ruling also looked specifically at the impact of merging the world's No2 and No3 iron ore producers on Australians, especially steelmakers OneSteel and BlueScope Steel Ltd.

OneSteel has its own iron ore supply, while BlueScope recently signed a long term supply deal with BHP, so those two companies' situation is very different from European and Asian steelmakers.

BHP welcomed the ACCC's approval, while Rio Tinto highlighted that other regulators have yet to rule.

The merger, which Asian and European steelmakers oppose saying that would create a giant controlling more than a third of global ore, requires approvals in Canada, South Africa and the US.

The European Commission said this week it would rule on the deal by 15 January. The EC, however, is worried about the impact of surging commodity prices on manufacturers and consumers and analysts said it was unlikely that the EC would now clear the deal.

Also, European steel makers, including the world's largest steelmaker ArcelorMittal, will be lobbying strongly against the proposed merger.

The antitrust division of the US department of justice gave partial approval to the bid on 3 July. The takeover also needs agreement from South Africa.

BHP Billiton plans to register the offer and sale of securities it would issue to Rio Tinto Plc US shareholders and Rio Tinto Plc ADS holders by filing with the US Securities and Exchange Commission, the company said in a filing.

''The Rio Tinto offer will be an exchange offer made for the securities of a foreign company. Such offer is subject to disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the document will be prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies,'' BHP said in statement.

Rio, the world's second-largest iron-ore producer, rejected BHP's sweetened offer on 6 February, saying it significantly undervalued the company and its growth prospects.

BHP chief executive Marius Kloppers, who's borrowing a record $55 billion to pay for the deal, increased his offer to 3.4 shares for every one of Rio's, from a 3-for-1 proposal in November.