The odds on Morrisons winning the battle for rival Safeway were slashed by City bookmakers today after it was praised by competition watchdogs.

While the Competition Commission has yet to make any decisions on offers for Safeway, an exhaustive letter raised concerns about bids from Asda, Tesco and Sainsbury's and their potential threat to competition.

But the Commission said a bid from Bradford-based Morrisons, which sparked the bidding war in January, could be "pro-competitive" because it would maintain four national supermarket players.

The Commission is examining whether any of the proposed deals would create an excessively dominant supermarket group which would damage shoppers and suppliers.

City bookie Cantor Index said it had cut odds on Morrisons winning Safeway from 8/1 to 3/1 with Wal-Mart-owned Asda at 9/4.

Rhys Williams, retail analyst at stockbroker Seymour Pierce, said: "Morrisons is more likely to get through the most unscathed. The rest are likely to be blocked and it won't be worth their while pursuing bids." Cantor has retail entrepreneur and Bhs owner Philip Green as current favourite at odds of 7/4.

Mr Green has been given the all-clear from the Government but has yet to table a bid so his potential takeover does not come under the remit of the investigation.

Morrisons kicked off the fight for Safeway in January when it offered £2.9 billion for the 479-store chain.

The three biggest UK supermarkets later weighed in with bids of their own but the Competition Commission could yet block all of the proposed bids.

As reported in yesterday's Telegraph & Argus, Morrisons' joint managing director, Bob Stott, reacted positively to the Competition Commission report.

"We remain convinced that Morrisons is the best long-term owner of Safeway, from the perspective of customers, suppliers, employees and shareholders," he said.

Tesco chief executive Sir Terry Leahy said: "As we have previously stated, and as the Commission notes, the current proposals affecting the future of Safeway raise serious issues as to whether a structural change, which could see the four major retailers become three, should be permitted."

A remedies statement sent out today identified a raft of issues for consideration in a 14-page letter which highlighted the complexity of the competition situation surrounding supermarkets. In the letter the Commission pointed towards store sales and improved terms for suppliers among the remedies to the supermarkets' bids.

At the heart of the battle are local and national competition issues, prices and the impact of the potential mergers on suppliers. Sainsbury's boss Sir Peter Davis said the remedies held no surprises.

The Commission inquiry, headed by Sir Derek Morris, is due to report its findings by August 12.