UK Edition
Watchdog intervenes in JD Sports' takeover of Footasylum
The competition watchdog said JD Sports' £90m takeover of Footasylum could lead to “higher prices” and “worse choice” for shoppers, but fell short of explaining its reasons in more detail.
The Competition and Markets Authority (CMA) started scrutinising the deal in May, two months after JD Sports swooped on its smaller rival.
On Thursday it said it may examine the merger in more detail unless JD Sports acted on some of its concerns. The retailer now has five days to take up the CMA's recommendations.
JD Sports defended the deal and said there would be “significant operational and strategic benefits” from the union.
One industry observer said that buying Footasylum’s 70-odd stores was not significant enough to reduce competition and JD Sports' £2bn sales dwarfed Footasylum’s revenues of £200m.
But one competition lawyer said: “To be honest, the CMA doesn’t really care that one part is smaller than the other [if they’re competitors]. I’ve seen it get agitated before over much smaller deals.”
Peter Cowgill, executive chairman of JD Sports, said: "We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business.
"Our discussions with the CMA are ongoing as we consider whether to proceed to phase two or if acceptable remedies can be agreed at this stage. We look forward to working constructively with the CMA in this regard and will provide further updates in due course."
JD Sports is striving to win the same consumers as Footlocker and Sports Direct as well as Asos, Quiz and Next, which also sell other brands.
Colin Raftery, senior director at the CMA, said: "JD Sports is already by far the largest player in the growing sports fashion sector, so any deal that results in it buying up one of its closest competitors could clearly give cause for concern.
"Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match. That's why we're concerned this deal could lead to higher prices, less choice and a worse shopping experience for customers."
JD Sports shares closed 2.9pc lower at 692p.