EMPIRE ONLINE received a written warning that its vital relationship with fellow gaming group Party Gaming might be changed — but did not tell investors about the letter in the prospectus for a float earlier this year.

In its prospectus, the group raised the possibility of such a move, but said it “will not materially affect the revenues of the group”. It also said the directors were unaware of any intention by Party to terminate the companies’ partnership agreement.

The revelation of the letter is a fresh twist in the ongoing row between the companies. They are at loggerheads after Party separated the poker system used by its own players from that used by players at its partner companies. The change moved all Party’s players to an improved platform with better features. Punters playing at Empire were kept on an inferior platform. Last Monday Empire said it would launch legal action against Party because of “damage” caused to it by the changes. Its shares have slid from 175p at float to close last week at 69½p.

It is understood that Empire was made aware that Party Gaming might alter the platform arrangement in a letter dated May4, a month before the flotation.

Empire sources sought to play down the letter’s relevance, saying that there had been no omissions from the prospectus.

The damage caused by the switch by Party was due not to the platform changes, sources said, but by a move by Party to encourage Empire players to switch to its sites. Insiders at Party deny this. The sources at Empire also emphasised that the contract with Party had not been “terminated” despite the change in the relationship.

Both companies declined to comment this weekend.

On Monday Empire said it would “vigorously pursue” legal action over Party’s decision. Analysts said it might seek damages of more than £400m. Party said it was “highly confident of a successful outcome”.

Empire recently rejected a lower-than-anticipated offer of 60p a share from Party. o Crystal Gaming has scrapped a planned £140m float. The company was due to list last Friday but that will now not happen until the new year — if at all. “We’re looking at the strategic options available,” said a source close to the company.