OFT refers Ottakar's deal to Commission.

HMV Group's planned acquisition of bookseller chain Ottakar's will be probed by the Competition Commission. British regulator the Office of Fair Trading today (Dec. 6) said it has referred to the Commission following an "unusually high level of consumer complaints" on the deal. Under the terms of HMV's proposal, the offer will now lapse.

HMV, Britain's market-leading specialist music retailer, launched a cash takeover bid for Ottakar's in September in a deal valuing the U.K. 130-store bookseller at roughly £96.4 million ($167 million). HMV already owns the rival Waterstone's bookstore chain.

In a statement issued today (Dec. 6), OFT CEO John Fingleton noted that the transaction would combine 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.

"The unusually high level of consumer complaints to the OFT shows that U.K. book-buyers value the fruits of this competition, which the merger would eliminate," he said. "We are asking the Competition Commission to explore these concerns further"

HMV described the OFT's move as "very disappointing" and vowed to "pursue vigorously" its position on the deal before the Commission.

In a statement issued to the London Stock Exchange, HMV Group CEO Alan Giles said the news was "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."

Giles added, "The group intends to discuss its plans with the Competition Commission with confidence, although it is yet to see the OFT's detailed decision."

The Commission is expected to report on its investigation May 22, 2006.