Woolworths, the struggling pick and mix retailer, was today dealt another blow by the referral of its purchase of books wholesaler Bertram to the Competition Commission.

Woolworths shares were amongst the heaviest fallers in the FTSE-250 as investors worried that the £39 million purchase, only announced in January, would have to be unravelled.

The company said it was "disappointed" with the decision by the Office of Fair Trading to refer the acquisition but that it would co-operate with the Commission's inquiry. The Commission expects to report by September 14, but may extend its inquiry.

The deal was supposed to strengthen Woolworth's wholesaling arm Entertainment UK, which supplies high street shops with CDs and DVDs at a time when sales are falling at its own shops.

Woolworths was able to announce a contract with Virgin Retail at the end of January to supply it with books, DVDs and CDs partly thanks to the Bertram acquisition. It said the Virgin deal and Bertram acquisition would bolster annual revenues by £400 million and help make up for revenue lost by the ending of a contract to supply Tesco.

Alongside the Bertram deal in January, Woolworths unveiled falling like-for-like sales at its stores, hit by competition from supermarkets and digital downloads of music.

But the OFT today said that by buying Bertram, the number of book wholesalers in the UK is going from three to two, since Woolworths/Bertram and its rival Gardner each have above 40 per cent of the market.

Vincent Smith, Senior Director for Competition at the OFT, said there had been a large body of concern from retailers. He added: 'UK consumers spend some £360 million a year in independent bookstores, and appear to do so largely because these retailers stock a range of 'backlist' and 'mid-list' titles and offer specialist advice and service which they value."

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