The Office of Fair Trading had been evaluating Getty Images' acquisition of Rex Features since the deal was first announced in April.

Rex Features was founded in 1954 by Frank and Elizabeth Selby as a daily news and entertainment picture agency. Over the years, it represented the work of photographers such as Richard Young, SIPA Press, as well as the archives of the Daily Mail, Mail on Sunday and Evening Standard newspapers.

On 26 April, Rex Features entered into a definitive agreement to sell its assets to Getty. However, the acquisition had first to be approved by the Office of Fair Trading. Now, the deal has been scrapped after the Office of Fair Trading expressed concerns.

A spokeswoman for Getty Images tells BJP: "We are disappointed that our proposed acquisition of Rex Features has been referred to the Competition Commission and we respectfully disagree with the preliminary concerns expressed by the Office of Fair Trading."

She adds: "Given the distraction that this next phase could potentially bring to both Getty Images and Rex Features and the parties' desire to focus their business resources on the production and delivery of high quality services to their customers, we have decided not to pursue this acquisition any further. We still believe Rex Features to be a strong and valuable business and we wish the Rex Features team the very best in the future.

In an email to BJP, Mike Selby, editorial director at Rex Features, says that the decision to walk away from the deal was mutual. "We felt that the many-months-long investigations, which would have been involved if we decided to pursue the matter, would have been extremely stressful for our staff and unsettling for our suppliers, customers and agents, and we felt this could not be justified with no certainty of a positive outcome."

He adds: "Rex was never actively seeking a buyer, and we are not seeking one now. The offer by Getty was an interesting prospect, but now that it is off, we will continue to do what we have been doing all along - give photographers and photo users in the UK and around the world a service which is second to none."

Earlier today, the Office of Fair Trading said: "Getty and Rex are two of the largest suppliers of photographic images for editorial use by publications in the UK. Getty has significant strength in the supply of both archive and current entertainment-related editorial images. The OFT is concerned that, if the merger is allowed to go ahead, the loss of Rex as an independent competitor could enable Getty to increase prices for customers."

It added: "During its investigation, the OFT heard a significant number of concerns from third parties, which supported the view that the profiles and extensive image archives of Getty and Rex mean they are close competitors. The OFT considered carefully whether there would be sufficient constraint on Getty from existing agencies and/or new entrants into the market. However, the evidence available on this was inconclusive, and therefore there remains a realistic prospect of a substantial lessening of competition."

Amelia Fletcher, the senior director of mergers at the Office of Fair Trading, added: "A number of publishers, the key customers in this market, are concerned about the potential impact of the acquisition. Some of the information available to the OFT in this case was patchy and inconsistent. We have not been able to rule out competition concerns on the basis of this evidence, and so the right course of action is to refer the merger for a fuller investigation by the Competition Commission.'

In April, Jonathan Klein, Getty's co-founder, welcomed the acquisition. "Celebrity and entertainment content is a growing and vital part of the editorial imagery industry and this acquisition positions us to meet and exceed the demand for nearly instantaneous material," he said.

Getty has said that it would retain the Rex Features brand, while combining the agency's resources with the giant stock agency. It added that "Getty Images’ global distribution channels will increase international customers’ access to Rex Features’ products and services."