Colleges fear a scramble for 16-year-olds under plans to give grant-maintained schools freedom to open sixth forms without consulting the Secretary of State.
Under proposals in the Government's education White Paper, published this week, opted-out schools will no longer have to apply to change status.
Deregulation will sideline the Further Education Funding Council, which advises Education and Employment Secretary Gillian Shephard - who has the final say on applications - on whether a move would add to choice.
The White Paper says GM school governors will be expected to consult local FE colleges and the FEFC, but will ultimately have the power to approve a change.
The proposals sparked warnings from the FEFC and colleges of a proliferation of small school sixth forms, which principals say will hit enrolments and lead to cuts in programmes.
They raised concerns that schools would receive preferential treatment on funding for post-16 students compared with colleges. Despite Government denials, "the evidence points to these schools receiving more funding", an FEFC spokesman said.
Since 1991, 84 applications for sixth forms have been made by grant-maintained schools, of which 42 have been approved and 10 are being considered. Once new legislation is passed, nothing can stop the remaining 32, which were rejected, pressing ahead.
Competition for post-16 students has already come to a head in Kent, where 42 schools are running illegal sixth forms.
Ben Thomason, principal of South Kent College, said: "To just have a free-for-all and let the market decide goes too far."
At Brockenhurst College, surrounded by GM schools with new sixth forms, principal Mike Snell said: "This could actually lead to restricted choice. It will lead to institutions choosing students rather than the other way round. "
Alan Harrison, principal of Mackworth College, Derby, where tertiary colleges compete with GM sixth forms, said schools with sixth forms were unlikely to give impartial advice to students over the choices available.