The competition commission today said a takeover of the bookseller Ottakar's by HMV, which owns the larger Waterstone's book chain, would not harm the public interest.

Its provisional verdict came despite appeals from authors and publishers who said a merger would reduce consumer choice and hit independent bookshops already suffering amid strong competition from supermarkets and the internet.

HMV launched a 440p a share bid for Ottakar's last year, valuing the bookseller at around £97m.

However, the music retailer - which owns 325 music outlets and 197 Waterstone's stores - put the offer on hold after the Office of Fair Trading referred it to the commission in December.

Analysts believe another HMV bid could be up to one-third lower after Ottaker's yesterday reported a steep fall in sales, announcing a pre-tax loss of £4.6m for 2005.

HMV said it was considering the commission's report, with a final ruling to be made on May 22. "We are unlikely to make a decision [on whether to bid again] before May 22," a spokesman said.

"We are pleased with the ruling ... we always believed there would be no substantial lessening of competition."

In its report, the commission concluded that a takeover would not push up book prices because there would still be the same pressures from supermarkets and online retailers.

It said HMV would have "every incentive" to ensure both chains offered a full range of titles.

"In the few locations where Waterstone's and Ottakar's stores are close together, we found the range of books and quality of service were similar to their stores located in other areas," Diana Guy, the commission chairwoman, said.

"So the effect of competition between Waterstone's and Ottakar's at the local level seems limited."

Shares in Ottakar's rose by 4.6% to 340p in morning trading, while HMV shares fell 1.3% to 171p.