BEIJING, March. 7-- US anti-trust enforcers moved to delay Blockbuster Inc's US$833 million bid to take over video-rental rival Hollywood Entertainment Corp, signaling the government may challenge the combination.

The US Federal Trade Commission(FTC) said Blockbuster gave anti-trust enforcers inaccurate pricing data and sought a court order to postpone the acquisition. The action could lead to Hollywood's takeover by Movie Gallery Inc, the third-largest US video-rental chain. Hollywood accepted Movie Gallery's competing bid, which was cleared last month by the FTC after it determined that combination would not reduce competition.

Friday's move"increases the chance that Movie Gallery gets the deal done," said Washington anti-trust lawyer Robert Doyle, a former FTC official."To go after Blockbuster on a procedural issue, I think the commission has to feel very confident they have a strong substantive case."

Blockbuster said it has complied with the FTC's information demands and accused the agency of trying to scuttle the combination.

"Today's action is a diversionary tactic by the FTC staff that's intended to forestall any hearing on the merits," said Randy Hargrove, a spokesman for the Dallas-based company."We remain committed to pursuing the acquisition of Hollywood."

The FTC asked US District Judge Ellen Segal Huvelle in Washington to order Blockbuster, the largest US video-rental chain, not to pursue the takeover of No 2 Hollywood until Blockbuster provides more information as required by law.

The agency is investigating whether the combination would result in higher prices for consumers. Blockbuster and Hollywood together control more than half the video-rental market, according to industry analysts.

Blockbuster"provided insufficient and inaccurate pricing data" about video rentals, the FTC said in a statement. Such data is used by the FTC to determine whether a merger would enable the combined company to raise prices.

The FTC said it sought the court order because Blockbuster contends it is free to pursue the takeover after March 11 on grounds it has already provided all the information the agency needs.

The FTC said in court papers its economic analysis of the Blockbuster deal was"fatally flawed" because the company's data about rental fees were inaccurate. The agency attributed the problem to a"programming error" that was not corrected until February 22, leaving too little time for the FTC to review the material and permit Blockbuster to proceed with the acquisition by March 11.

Blockbuster's original data submission was missing large amounts of information that was not provided until March 1, the FTC said in court papers. The computer disk that Blockbuster submitted with corrected information contained 96 megabytes of data compared with the 2.8 megabytes that were on the original disk, the court papers said.

The FTC said it is not asking the court to rule that the hostile takeover would violate antitrust laws. Still, analysts said the lawsuit suggests the FTC is preparing to challenge the combination.

"The FTC looks like it's taking this Blockbuster-Hollywood deal very seriously," said Tom Burnett, president of the Merger Insight affiliate of New York brokerage Wall Street Access. The FTC appears determined"to investigate this transaction."

Friday's lawsuit also upsets Blockbuster's strategy of forcing the FTC to make a decision by March 11 so it would be in a position to win the race with Movie Gallery to buy Hollywood, Doyle said.

"This procedural lawsuit takes Blockbuster off that track" and now the FTC"can prolong the deal without addressing the substantive case," Doyle said.

Hollywood last month rejected Blockbuster's bid, citing the risk of an FTC antitrust challenge.

Blockbuster offered US$14.50 per share in cash and stock for Hollywood, which is based in Wilsonville, Oregon. Movie Gallery, based in Dothan, Alabama, offered US$13.25 in cash.

Blockbuster shares fell 8 US cents to US$8.67 as of 4 pm on the New York Stock Exchange. Hollywood shares rose 30 US cents to US$14.06 on the NASDAQ Stock Market, where shares of Movie Gallery rose 46 US cents to US$23.46.

Burnett said he was mystified by the rise in the price of Hollywood shares.

(Source: James Rowley/China Daily)