Despite recognising anti-competitive elements in the supply chain, the OFT decided against immediate action as there was "a reasonable prospect of further market changes which could benefit consumers".
NFRN trade relations manager David Daniel slammed the verdict as "defying all logic".
"I've seen nothing to justify the decision," he told Convenience Store. "It seems the OFT is too willing to accept evidence from some sources, but not others.
"How consumers, including the interim consumer the retailer are meant to benefit from a supply chain that lacks competition at wholesale level, and which is riddled with restrictive practices, fixed (and increasing) prices and inefficiency, is hard to imagine," he added.
John Lennon of the Association of News Retailing said the OFT should have acknowledged that the demise of Dawson News had significantly reduced choice and competition.
However, he noted the OFT had not given the industry a clean bill of health as it found areas of concern, particularly in the distribution of magazines. "The issues raised are not going to go away and the OFT will have to revisit the issue," Lennon said.
Daniel added that the NFRN, which requested the market investigation in 2006, was looking at various avenues of appeal. These include an approach to Lord Mandelson, who also has the power to demand a referral.