The Competition and Markets Authority (CMA) said on Thursday the proposed merger of Bury-based JD Sports Fashion and Rochdale-based Footasylum raises competition concerns.
The CMA said it has found that JD Sports’ takeover of close competitor Footasylum could be bad for shoppers.
The CMA said it 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.”
It said JD Sports “must now address the concerns identified or face a further, more in-depth, investigation.”
In March JD Sports Fashion said it agreed to acquire Footasylum in a deal valued at up to £90.1 million.
In a statement, the FCA said its initial, Phase 1, investigation found that the merger could remove one of JD Sports’ closest competitors.
While a wide variety of retailers sell sports clothing and footwear, “the merging businesses are two of a smaller number of firms who have the brand relationships and market presence to be able to credibly meet the demands of sports fashion customers,” said the CMA.
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 Fashion executive chairman Peter Cowgill 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.
“We also believe that there will be significant operational and strategic benefits from a combination of the two businesses.
“Our discussions with the CMA are ongoing as we consider whether to proceed to Phase 2 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.”