Online gambling companies in the UK are facing a regulatory investigation into potentially unfair practices, such as the cancellation of winning bets and tough conditions around receiving payouts.

On Friday, Britain's Competition and Markets Authority said an initial review of the industry had "highlighted examples of potentially unfair treatment", including users being forced to play for longer than expected before they can withdraw winnings and companies having "wide discretion" to cancel bets or alter odds after wagers have been placed.

"Gambling inevitably involves taking a risk, but it shouldn't be a con," said Nisha Arora, the regulator's senior director for consumer enforcement.

"We are worried players are losing out because gambling sites are making it too difficult for them to understand the terms on which they're playing, and may not be giving them a fair deal."

The CMA said 5.5m people in the UK regularly use online gambling sites, creating an industry worth £4bn a year.

Among the issues the regulator will investigate are complaints that punters are unable to withdraw deposits when they choose to stop playing, the ability of companies to change odds or cancel bets after saying they made a mistake, and short time limits for players to register complaints.

Sarah Harrison, chief executive of the Gambling Commission, the UK's regulatory body for gambling, said "operators are still not doing enough", adding that many "appear to bamboozle rather than help the customer make informed choices".

The CMA said it was requesting evidence from companies and website users as part of its investigation.

The move comes at a time that UK gambling companies complain that they are facing increased taxes and regulatory burdens that are damaging their earnings.

In December 2014, the government introduced a "point of consumption tax" — a 15 per cent levy on gambling no matter where bets are made, and bookmakers including Paddy Power Betfair, GVC and 888 Holdings are among those to say profits have been hit as a result.

But one gambling industry executive said: "I'm not surprised [the CMA] is taking a look, because everyone is making far too much money."

Increased regulation is one of the main reasons behind a wave of consolidation hitting the industry.

Rivals Betfair and Paddy Power combined this year, and Ladbrokes and Gala Coral are in the final stages of finalising a merger. GVC Holdings, owner of Sportingbet, bought Bwin.party last year after outbidding 888 Holdings.

William Hill and Canadian group Amaya, owner of Pokerstars, the world's largest online poker company by number of users, called off talks over a £4.6bn merger this week.

William Hill shareholders expressed reservations over the deal, but one person close to Amaya said the merger also faced hurdles from its investors due to an expected UK government review into gambling machines.

The likely "triennial review" could lead to restrictions on fixed odds betting terminals within betting shops, which represent a significant revenue stream for bookmakers on Britain's high street.

Activist groups like the Campaign for Fairer Gambling argue that these terminals are the "crack cocaine" of gambling and disproportionately attract problem users — an allegation denied by bookmakers.

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