UPDATE 1-Australian watchdog raises concerns about Expedia bid for Wotif

Wed Sep 3, 2014 10:06pm EDT

* Takeover leaves just one competitor for Expedia

* Wotif shares down up to 7.4pct

* Final decision Oct. 2 (Recasts, adds deal context, ACCC comments, Wotif comment)

SYDNEY, Sept 4 (Reuters) - Online travel giant Expedia Inc's takeover of Australian rival Wotif.com Holdings Ltd hit a snag on Thursday when a regulator raised concerns about competition and deferred its ruling on whether to approve the deal.

Wotif shares plunged more than 7 percent after the Australian Competition and Consumer Commission (ACCC) said the takeover could "remove a significant competitive constraint", as it put off a decision on whether to approve the A$699 million ($653.77 million) takeover proposal for another month.

Blocking the deal would not just make it harder for U.S-based Expedia to grow in Australia and the Asia-Pacific. It would also continue uncertainty about the future of Wotif, which last month said its annual profit fell by a sixth because of business lost to Expedia and another large U.S. rival Priceline Group Inc.

The commission said industry players feared that "with the removal of Wotif as an independent competitor a significant competitive constraint on Expedia will be removed and Expedia will increase commission rates".

Joining two of Australia's three biggest accommodation sites would leave Expedia - the world's No. 2 travel website - competing only with Priceline Group Inc.

This could leave "limited incentive for them to compete with each other by offering lower commission rates to accommodation providers," the commission said.

The regulator had been due to say if it would allow the deal on Thursday. Instead it said it needed more industry feedback and would now give its ruling on Oct. 2.

In a statement, Wotif said it would work with the regulator to "resolve any issues identified as a result of market enquiries".

Wotif shares traded as high as A$5.94 in early 2013 before a profit warning in December saw them tumble to a record low of A$2.29 on March 17. On Thursday the shares were down 5.5 percent at A$3.08, compared to Expedia's A$3.30 offer price.

Expedia's Nasdaq-listed shares last closed at $88.40.

(1 US dollar = 1.0692 Australian dollar) (Reporting by Swati Pandey; Editing by Edwina Gibbs and Stephen Coates)