ITV was told today that it might not be allowed to sell Friends Reunited, even for a £145 million loss.

The Office of Fair Trading (OFT) ruled that ITV’s attempt to sell Friends for £25 million to the owner of two genealogy sites could breach competition law.

ITV must now convince the Competition Commission to allow it to sell off Friends, which the broadcaster bought for £170 million and once hoped would make a viable British competitor to Facebook before its profits collapsed. Friends’ most successful property is its Genes Reunited genealogy site, but because Brightsolid, the prospective buyer, owns FindMyPast.com and 1911 Census.com the OFT is worried about the reduction in the number of players in that sector.

Amelia Fletcher, OFT senior director of mergers, said that the regulator believed the genealogy market was increasingly important as programmes like the BBC’s Who Do You Think You Are? have helped to stimulate viewers’ growing interest in researching their family tree.

The only other significant competitor is Ancestry.co.uk, part of the American group Ancestry.com. Even though the OFT said that Ancestry.co.uk is the market leader, Ms Fletcher said that the drop of three providers to two could lead to a reduction of choice or service to consumers.

ITV was not amused by the unexpected regulatory obstacle. “Who knew the genealogy market was this cut-throat?” one insider complained. “Would this have happened in the United States? Is this a sign of how internet transactions are going to be regulated in the future?”

It is not the first time that ITV has fallen foul of the regulators over its online aspirations. In February the Competition Commission blocked plans by ITV to set up a single online video website with the BBC and Channel 4.

This time, the OFT believes that it will not be possible for new companies to enter the genealogy market because there are barriers to entry for new providers. Although some historical records are in the public domain, others have been bought up by the principal players. The OFT believes that amateur researchers would be reluctant to pay to use multiple databases if they ciould avoid doing so.

Brightsolid, which is owned by DC Thomson, the publisher of The Beano, said it would continue to try to see the purchase through, with the help of ITV.

The Competition Commission will spend the next six months investigating and has set a deadline of April 16, 2010 for reaching its conclusion.

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