OFT chief executive John Fingleton said: 'This transaction brings together two book retailers that compete closely on a number of non-price factors such as range and variety of books, and service quality, primarily at the local level. In particular, our economic analysis shows that Ottakar's competes harder on non-price factors when a Waterstone's is nearby.
'The unusually high level of consumer complaints to the OFT shows that UK book buyers value the fruits of this competition, which the merger would eliminate. We are asking the CC to explore these concerns further.'
Commenting on the descion, HMV Group chief executive officer Alan Giles said: 'The OFT's statement is very disappointing as we believe our offer would have resulted in an enhanced proposition to customers and greater sales of books, with no substantial lessening in competition.'
A statement from Ottakar's said: 'The board is disappointed by the OFT's decision and will co-operate fully with the investigation.'
Seymour Pierce analyst Richard Ratner was sceptical about the outcome. He said: 'The referral of its bid for Ottakar's is not good news [for HMV], with the review likely to take six months, and a strong possibility that it will not be allowed to.'
The Competition Commission has up to 24 weeks to complete its investigation into the proposed merger. An eight-week extension is available under special circumstances. A Competition Commission spokeswoman said: 'It could be that we publish findings before that time.'
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