Proposed £90m JD Sports acquisition faces further CMA scrutiny

A proposed takeover by Bury-based sports and fashion retailer JD Sports will be further investigated by the Competition and Markets Authority (CMA).

On September 19, the CMA ruled that the £90m deal to acquire the Footasylum business could be bad for shoppers.

The CMA is concerned that the loss of competition brought about by the merger could result in a worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality.

In response, JD Sports announced today that following the CMA’s Phase 1 decision it has carefully considered the CMA’s observations and its claims that the acquisition of Footasylum would give rise to a realistic prospect of a substantial lessening of competition.

It said it firmly believes that there is clear evidence that the acquisition would not result in a substantial lessening of competition in the relevant clothing and footwear retail markets where the two businesses operate.

The group said: “In light of the content of the CMA’s full Phase 1 decision, JD has informed the CMA that it does not consider that there are any appropriate remedies that can be offered at this time to avoid a reference to Phase 2 being made. The CMA has, therefore, confirmed today that the transaction will be referred to a Phase 2 investigation.”

The Phase 2 investigation is a more in-depth review, led by an inquiry group chosen from the CMA’s independent panel members. The group, often from accountancy, business or law backgrounds, will gather evidence to inform its detailed analysis before arriving at a final decision.

An issues statement, setting out in detail the issues that the inquiry group expects to investigate, will be published in the coming weeks. Members of the public and other interested groups will be invited to give their views on this.

JD Sports said: “JD’s commercial success rests on its global in-store and online offerings being compelling to both consumers and its brand partners.

“The acquisition of 70 Footasylum stores in the UK does not affect this commercial reality and does not adversely impact the competitive landscape.

“Consumers and brand owners can, and do, exercise choice across a wide range of large and sophisticated multi-channel and online retailers, both in the UK and internationally, with the major brands increasingly selling their products direct to consumers through their own sales channels.

“The challenging UK retail market provides many examples of retailers who have either suffered or been unable to survive because they have not met the rapidly evolving requirements of consumers and brand owners.

“Indeed, JD’s rationale for carrying out this acquisition was to retain Footasylum’s position as a multichannel retailer, both on the UK high street and online, while ensuring that Footasylum’s diverse and complementary offer remains available to its consumers.

Peter Cowgill, executive chairman of JD Sports Fashion, said: “The CMA has referred their review of this acquisition to Phase 2 on the basis that it could be bad for competition and may have an impact on price.

“I strongly disagree with this. This transaction will not result in any price increases or a reduction in product ranges or service quality.

“The focus of all of our group businesses is to ensure we deliver a best in class, multichannel experience to our consumers by offering a compelling product proposition.”