The controversial decision comes despite the fact that Ladbroke sought and received confidential assurances from the OFT that it would allow the deal to go ahead - before it proceeded with the acquisition.
The U-turn from the OFT came amidst growing political pressure for a full MMC inquiry from senior members of the Government. Mrs Beckett said the acquisition raised competition concerns in the off-course betting market. Ladbroke now has more than 36 per cent of the betting shop market with more than 2,600 outlets.
Peter George, chief executive of Ladbroke, said he was disappointed by the Government's decision. "Although we had preliminary contact with the Office of Fair Trading before we acquired Coral from Bass on a conditional basis, we recognised that the transaction may be referred to the MMC," he said.
The Government could force Ladbroke to sell hundreds of betting shops to overcome monopoly concerns. Nomura, which recently bought William Hill, the Tote and Stanley Leisure, is likely to emerge as a potential buyer for sites.
The acquisition has caused concern among senior cabinet ministers. Robin Cook, the Foreign Secretary and a keen horse racing fan, has publicly voiced his worries about the deal and Alan Meale, another Labour MP, led the attack against the acquisition.
The City expected a full MMC inquiry and Ladbroke's shares rose 3.25p to 334.5p yesterday. The investigation will last until July 7.
Ladbroke had hoped to avoid an inquiry by selling 133 betting shops to the Tote to conform to the so called "quarter mile rule" laid down by the MMC when Mecca merged with William Hill in 1989. This stipulated that a bookmaker could not have more than one shop within a 440-yard radius and was aimed at ensuring that no one was able to establish a local monopoly.Reuse content