The U.K. OFT (Office of Fair Trading) has referred the proposed merger between Ticketmaster Entertainment Inc and Live Nation Inc to the Competition Commission.

Prior to the proposed merger, Live Nation made a deal with Europe's largest ticketing agent, Bremen, Germany-based CTS Eventim, who would provide ticketing services in the U.K. to Live Nation, effectively taking over from Ticketmaster.

Live Nation has used Ticketmaster as its principal ticketing agent, but this agreement expires in December 2009.

In a statement, the OFT says it has passed the case to the Competition Commission (CC) because it believes there is "a realistic prospect of a substantial lessening of competition resulting from the proposed merger, because of the prospect that CTS will withdraw from the U.K. market. Even if CTS were to remain in the market, the test for reference would still be met because of the prospect that its competitive strength could be significantly reduced without the full benefit of its arrangement with Live Nation."

The statement continues: "The proposed merger also raises a concern about whether Ticketmaster's key position in the ticketing market could lead to the new company restricting competition in the promotion of live music events, for example through limiting access by rival promoters to ticket agent services. The CC may wish to examine this issue in greater detail."

Live Nation and Ticketmaster announced their proposed merger on Feb 10, 2009.

The Competition Commission is expected to report by Nov. 24.

"Live music is a fast growing industry, currently worth around £1.9 billion [$3.1 billion] a year," said Ali Nikpay, OFT senior director, in a statement. "We expected CTS's entry, through its contract with Live Nation, to be an important new competitive dynamic in the U.K. ticketing market.

"The proposed merger risks undermining this by potentially prompting the exit of what would likely have been a third large player from the U.K., or at least significantly stunting its effectiveness. It creates a realistic prospect that the merger will deny those attending live music events the benefits of more competition in the distribution of tickets, which could include lower overall prices."

The OFT is a U.K. government department that promotes and protects consumer interests, working to ensure that businesses are fair and competitive. It has various powers under consumer and competition legislation.

"Today's referral by the Office of Fair Trading to the Competition Commission is a standard part of a full regulatory review of our transaction, and we are confident that after the Commission completes its work, they will conclude that it meets the criteria for final clearance," Live Nation responded in a statement.

"We look forward to demonstrating how the joining of Live Nation and Ticketmaster will bring about a better approach to live entertainment events, creating greater choice and access for fans and artists while providing much-needed growth to the entertainment industry. Live Nation and Ticketmaster will cooperate fully with the Competition Commission as it reviews the merits of our proposed merger."