Nisa-Today's has abandoned its proposed merger with Costcutter, launched in May.

The company said the complaint made to the Office of Fair Trading last month regarding its alleged cartel activities had effectively derailed negotiations.

It said its own internal investigation had concluded there were no grounds for the complaint. But it added that the complaint had led to the banks it was negotiating with slapping unacceptable conditions on their funding for the merger.

Consequently, Nisa-Today's said it had decided to abandon the deal. It said no further statement would be made until after a meeting between the committee negotiating the terms of the merger and the Nisa-Today's board on 23 October, at which finalised terms had been expected to be presented.

Nisa-Today's announced that the merger committee “was informed that the package of banking facilities being put together by the funding banks would be available only if substantial changes were made to the terms of the deal, which would involve conditions being attached to payments being made to the members and further costs being incurred by the newly merged company”.

It added: “The principal cause of those changes was the uncertainty created by the cartel allegations made against the company. The merger committee has concluded that it cannot recommend the revised proposals, since it does not consider that they are in the best interests of Nisa-Today's member shareholders.

“Having rejected these late and material changes, it is unlikely that the merger committee will have a proposal to take for consideration to the board.”

Five members of the Nisa Members Association, a rebel faction within Nisa-Today's challenging the merger, lodged the complaint of cartel activity with the OFT. They claimed Costcutter retailers had been continuously discouraged from leaving the company's symbol group arm to join Nisa-Today's.