* Investigation of consumer complaint to last 6-9 months
* Merger would create Latin America's biggest airline
* One Brazil regulator has approved the deal (Updates with analyst comment, stock move, link to Factbox)
By Felipe Iturrieta
SANTIAGO, March 17 (Reuters) - A Chilean regulator said on Thursday it would probe the proposed merger of regional airline LAN LAN.SN LFL.N with Brazil's TAM TAMM4.SA TAM.N, in a setback for a push to create Latin America's biggest carrier.
LAN had urged the antitrust tribunal to ignore a petition by a consumer group, Conadecus, concerned that the investigation could delay or even block a signed merger to create one of the world's top 10 airlines. Brazilian regulators are seen approving the deal.
"The tribunal has rejected the submissions of LAN, TAM and (anti-trust agency) FNE, and so the start of the investigation sought by Conadecus remains in place," said Alejandro Domic, secretary of Chilean anti-trust tribunal TDLC.
He said the probe could last until the end of the year.
"Markets expected, after Brazil's approval, that the process would follow the same way. It is the worst scenario. ... at least in the short term it will deeply impact on the stock" of LAN, said Elizabeth Palma, an analyst at the Tanner brokerage.
LAN was not immediately available for comment. It has offered to cut fare prices and lay on more flights if the merger passes; it previously said it could take its case to the Supreme Court. For a factbox on LAN-TAM merger [ID:nN17190954]
The tribunal's move comes after Brazil's civil aviation authority gave the proposed merger the green light with no restrictions earlier this month, though approval of other Brazilian regulators is still pending. [ID:nN03126214]
LAN, considered one of Latin America's most profitable airlines, had said on Jan. 19 that the merger could take up to nine months pending approval from authorities in both countries. [ID:nN19206493]
Analysts say LAN would effectively acquire the Brazilian airline if the deal goes through, with Chile's Cueto family -- LAN's main shareholder -- emerging with the major stake in one of the world's top carriers.
Since Conadecus asked TDLC to probe the merger in late January, LAN shares have declined 13.3 percent, while TAM stock fell 16.1 percent. The Chilean regulator announcement was released after Chilean and Brazilian stock markets closed. (With reporting by Juan Lagorio, Brad Haynes, Fabian Cambero, Moises Avila and Antonio de la Jara. editing by Simon Gardner, Leslie Adler, Gary Hill)