The competition regulator will review the proposal by BHP Billiton and Rio Tinto to create a joint venture to mine the iron ore resources of WA's Pilbara.

A spokeswoman for the Australian Competition and Consumer Commission confirmed to The West Australian this morning that a review of the deal would take place.

The mining giants announced today they would set up a production joint venture in a move they say will save them $US10 billion.

It also meant a planned tie-in between Rio and Chinese-firm Chinalco has been dropped.

There are competition concerns about BHP-Rio deal, particularly in the development of WA's valuable iron ore resources.

The ACCC review will most likely cover the same issues it examined in a review completed last year that looked at a full merger of BHP and Rio.

In that case, the competition regulator gave the green light to the deal.

At the time, ACCC chief Graeme Samuel played down concerns about how such a merger would affect iron ore development in WA.

"The ACCC's inquiries indicated that the merged firm would be unlikely to limit its supply of iron ore given the uncertainty it would face in relation to the profitability of this strategy and the risk that limiting supply would encourage expansions by existing and new suppliers as well sponsorship of alternative suppliers by steel makers," he said at the time.

SHANE WRIGHT ECONOMICS EDITOR