Announced in May 2010, the deal would have created a single company providing stock photos, stock footage, stock music and editorial images. The OFT had referred the planned merger to the Competition Commission.
"Some of the information available to the OFT in this case was patchy and inconsistent. We have not been able to rule out competition concerns on the basis of this evidence, and so the right course of action is to refer the merger for a fuller investigation by the Competition Commission."
The Competition Commission was expected to report by 23 December 2010.
However Rex Features told Macworld: "It was felt that the six to eight month process which would be carried out by the Commission would be too disruptive and unsettling for our staff, suppliers and customers who have already had to endure weeks of uncertainty. It was therefore decided to call off the proposed merger and the acquisition will not now be going ahead."
"We will continue to work as hard as ever to provide our customers, agents and contributors with a service which we are confident is second to none, to compete effectively with our many industry rivals, and to build on the more than half a century of history and reputation with which the name Rex Features is synonymous."