The Office of Fair Trading is afraid the social network might stop picture uploads to other sites from the app, or restrict other apps' ability to upload to Facebook.
When contacted by CNET, Facebook said it's working with the U.K. agency, but didn't offer any other details.
"We'll continue to work closely with the OFT and look forward to answering any questions that arise," a Facebook spokesperson wrote in an e-mail to CNET.
Interested parties have until July 5 to respond to the agency's query for comments. The Office of Fair Trading still has to decide if it has jurisdiction over the deal. It can choose to pursue the investigation itself or refer it over to the UK Competition Commission by Aug. 23. According to The Guardian, the agency can investigate a merge if it creates an enterprise with an annual turnover of more than 70 million British pounds, or if 25 percent share of a market is created or enhanced. It's unclear if Facebook's revenues in the UK would hit that mark.
The Instagram purchase is part of Facebook's recent buying spree. The company went public last month and has since used its newfound fortune to buy up various companies.
The Instagram deal is also facing scrutiny in the U.S. as the Federal Trade Commission continues its investigation.
Update, 12:29 a.m. PT: Updated with a response from Facebook and a link to the OFT's site.