Britain is in thrall to a wonderful love affair with the book. Last year, 216 million of them, worth more than £1.5bn, were sold, nearly 6% more than the year before. Tonight, in prime time television, Channel Four screens Wednesday's "Nibbies", the British Book awards at which the much-prized "best read", voted for by viewers of the Richard and Judy show, went to Kate Mosse's medieval thriller Labyrinth. The result ensures that its sales - already a phenomenal 750,000 - will climb even higher. At the other end of the scale, Sotheby's announced it was selling a Shakespeare First Folio. They expect it to fetch up to £3.5m. From the almost priceless to the most enticingly discounted, not forgetting the amazing wealth of second-hand books available on the internet, more and more of us want more and more of them. Nothing to worry about there, then.

Yet publishers, and particularly small publishers, are sunk in gloom. For on Thursday, the Competition Commission - CoCo - announced that it was minded to allow the high street chain Waterstone's to take over the market town booksellers Ottakar's. They said that on balance it would not damage the consumer's interest, which is what they were there to consider. They pointed to the existing cut-throat competition in book selling, where the chains compete not only with each other, but also with supermarkets (responsible for 40% of paperback first day sales). And then there's the internet. The Amazon effect is transforming the bookselling industry. Consumers, the CoCo thinks (the final decision is not until May), will not suffer a monopoly in bookselling. Some publishers think it asked the wrong question.

The potential for harm is less at the sharp end of selling. It is further back in the production chain. Publishers have accused Waterstone's of abusing its dominant position in the "serious" book market, a position that will reach 50% of sales if it goes ahead and gulps down Ottakar's. They complained to the Office of Fair Trading that "bullying" Waterstone's demanded discounts of 60% for books to be in the front of the store, and not much less to place a large order of say 250 copies of a book, which is barely enough to put a copy in every branch. This has two effects. Independent booksellers cannot compete on price, though they often make up for it by being more interesting places to go. People like their local bookshop, they enjoy a Saturday morning browsing through new writers and old friends, retail therapy for the mind. The independents are often as hurt by new parking regulations as by discount book stores. It is the publishers, and particularly the small publishers, that are left struggling. Having to offer hefty discounts eats into slender margins. They can no longer afford to take risks to publish books that are unlikely to sell in large numbers, particularly non-fiction. Their survival depends on diversity in bookselling, on individual bookshops knowing what their customers like, making their own judgments. Ottakar's, despite being a chain, had a reputation for variety. If Waterstone's takes over its 140 stores - almost doubling its high street presence - Waterstone's will be dictating our taste.

Well, not quite. There is also the closely allied and now legendary Richard and Judy effect. When Mosse's Labyrinth was first discussed on the show's book club, it immediately sold another 60,000 copies. The woman who chooses the books, Amanda Ross, is dubbed the most powerful person in publishing. On the face of it, she is. She certainly shapes sales of a number of titles. The show can be the gateway to the big time for a dozen authors. But not all the books she selects become bestsellers. Richard and Judy have increased the number of people reading, and the kind of books they read. That's worth another cheer.