The Office of Fair Trading (OFT) announced that the proposed merger would be investigated in January this year. Today the Competition Commission has issued a "provisional conclusion" that the joint venture would not create a "substantial lessening of competition" within the sector.
Should the commission's final report cement this decision, the merger will create the UK’s largest multi-channel travel retailer, with a network of 1,300 high-street stores and a significant internet presence.
The final report is expected by 16 August and the parties are hoping the deal will be completed by the end of the financial year.
Thomas Cook’s 70 Going Places shops will be rebranded under the Co-operative Travel brand, however, all of the other shops will retain their own branding.
Thomas Cook currently has 780 high street stores, while the Co-operative Group has 360 and the Midlands Co-operative has 100.
The joint-venture will be 66.5% owned by Thomas Cook, 30% owned by the Co-operative Group and 3.5% owned by the Midlands Co-operative.
Manny Fontenla-Novoa, chief executive, Thomas Cook Group, said: "This announcement is not only great news for Thomas Cook and the Co-operatives, but also for our customers and staff too and we now look forward to bringing the merged business to life.
"High street retail remains an important distribution channel for package holidays and one that consumers continue to highly value. We firmly believe in the highly synergistic nature of this deal and the significant opportunities that it offers; this merger is just one part of the plan to strengthen our UK business."
Thomas Cook said last week that it is implementing a "fundamental operational and strategic review" of its UK business, after issuing its third profit warning this year. The group reported a 6% loss in revenue in its interim results last December, while cutting 500 jobs in a bid to cut costs.
Bricks and mortar competitors to Thomas Cook and The Co-op include Tui, which has more than 850 Thomson and First Choice shops across the UK.