Competition watchdog blocks JD Sports’ £90m takeover of Footasylum
The competition watchdog has provoked a furious response from JD Sports after blocking the retailer’s £90m takeover of rival Footasylum.
Following an in-depth investigation, the Competition and Markets Authority (CMA) ruled the tie-up would lead to a “substantially” lessening of competition nationally.
As a result, consumers would be left with fewer discounts and could receive lower quality customer service, it said.
But the move sparked an impassioned response from JD Sports, which branded the regulator’s decision “absurd”.
The fashion retailer said the decision “materially fails to take proper account of the dynamic and rapidly evolving competitive landscape in which we operate, as well as the long lasting — and likely permanent — impact that Covid-19 has had on our industry”.
JD Sports chain said Footasylum, which was in a “weakened financial position” even before the Covid-19 crisis, was particularly vulnerable to the downturn for retailers, adding that it may have been forced into administration without backing from the merger.
The sports fashion chain also cited increased pressures from rivals such as Mike Ashley’s Sports Direct, as well as brands such as Nike, whose own retail offerings were becoming increasingly powerful.
“We fundamentally disagree with the CMA’s decision, which continues to rely on an inaccurate and outdated analysis of the UK sports retail competitive landscape, and is underpinned by outdated and flawed customer surveys,” said Peter Cowgill, JD Sports executive director.
“When the CMA published its provisional findings in February, we said at the time that they demonstrated a complete misunderstanding of our market to an alarming extent. Today, and equally frustratingly, in the midst of a global pandemic and with the UK high street in a state of complete lockdown, the CMA’s final decision is even more absurd.”
Cowgill also took aim at the “self-serving testimony” of Sports Direct, which it said had “blatantly participated in the process for their own commercial interests rather than for the benefit of consumers”.
The CMA said it had considered a wide range of evidence and concluded that JD Sports and Footasylum were close competitors, with many shoppers saying they saw the other firm as their next best alternative.
In its full report the watchdog said it had taken into consideration the impact of coronavirus on the retail sector, but said there was no evidence the crisis had mitigated competition concerns.
However, it said JD Sports should be given sufficient time to sell Footasylum due to the current economic uncertainty.
“This decision comes at a very difficult time for retailers and we have been careful to consider the effects of coronavirus,” said Kip Meek, chair of the CMA inquiry group.
“However, we need to make sure we think about the impact of this merger on shoppers, both now and in the foreseeable future and we do not see the effects of the current crisis changing the competitive dynamics in a way that diminishes the substantial lessening of competition which we need to remedy.”
He added: “We never take decisions to block mergers lightly, but in this case the evidence has shown it is necessary for JD Sports to sell Footasylum, so that they can continue to compete against each other as independent businesses.”
JD Sport said it was considering whether to formally challenge the decision in the Competition Appeal Tribunal.