The OFT said its concerns about the merger, relating to risks around pricing and innovation, were backed by a “significant number of third party concerns” that it had received.
Mortgage Brain announced at the end of December 2010 that it was set to buy TrigoldCrystal and voluntarily notified the OFT.
However, the OFT said that the merged company would have “a very high combined market share”, given that the two are by far the UK’s largest mortgage sourcing software providers and considered each other’s closest competitor.
The OFT said it believes that existing suppliers would not be able to adequately compete with the combined force of Mortgage Brain and TrigoldCrystal, and that barriers to entering the market are high.
As a result, it is concerned that the merged company could increase prices and or decrease innovation, quality, range or service to customers.
Ali Nikpay, senior director of the OFT, said: “A significant number of customers are concerned about the potential impact the proposed transaction will have on prices, innovation, investment and choice. We believe that this is an appropriate case to refer to the Competition Commission for a fuller investigation.”
The Competition Commission is expected to publish its report into the merger by 1 September 2011.
Mortgage Brain and TrigoldCrystal said that they were disappointed, but respected the OFT’s decision.
Mark Lofthouse, chief executive of Mortgage Brain, said: “Following the announcement of the proposed acquisition of TrigoldCrystal by Mortgage Brain, everyone we spoke to recognised the considerable benefits it would bring to the mortgage industry.
“However, whilst disappointed, we respect the OFT decision and would like to thank all of our customers and business partners for their continued support and feedback throughout this process. Mortgage Brain remains as committed as ever to the UK intermediary mortgage market.”
Jon Whitmore, joint chief executive of TrigoldCrystal, added: “Whilst we believed there were benefits to the proposed transaction we have enjoyed a fascinating process and fully respect the decision of the OFT.
“We are looking forward to continuing to play a leading role in the provision of technology to the industry.”