The UK’s Competition and Markets Authority (CMA) said on Thursday that Bury-based retail giant JD Sports Fashion Plc may still have to sell Footasylum to address concerns about higher prices and fewer discounts for customers.
The CMA said it has provisionally found that JD Sports’ takeover of Rochdale-based Footasylum could lead to a worse deal for shoppers, after reassessing the merger.
“Following the CMA’s final decision to block the merger between JD Sports and Footasylum in May 2020, JD Sports appealed to the Competition Appeal Tribunal (Tribunal), which remitted the case back to the CMA for reconsideration,” said the CMA.
“Having gathered extensive additional evidence on the impact of coronavirus (COVID-19) and other developments in the sports fashion sector, the Competition and Markets Authority (CMA) has reached the provisional view that the merger could result in a worse deal for Footasylum shoppers throughout the UK.
“This means customers could find themselves facing higher prices, fewer discounts and less choice of products in store. It could also result in the merged company investing less in improvements to customer service.
“At this stage, the CMA’s view is that blocking the deal, by requiring JD Sports to sell Footasylum, may be the only way of addressing these competition concerns.”
Kip Meek, chair of the CMA group conducting the inquiry, said: “Since our original inquiry, we have gathered a significant amount of additional evidence, including on the impact of coronavirus, and we still have concerns about JD Sports’ takeover of Footasylum.
“This deal would see Footasylum bought by its closest competitor and, as a result, shoppers could face higher prices, less choice and a worse shopping experience overall.
“While many stores were closed during lockdown, online sales in this market have been stronger than ever, and revenue from in-store sales is rebounding as people return to the high street.
“JD Sports, Footasylum and others in the sector now have the opportunity to give us their views – on both our provisional decision and our suggested remedy.”
JD Sports executive chairman Peter Cowgill said: “We have made compelling submissions on the committed positioning of the global brands towards Direct to Consumer and the consequent impact on an extremely competitive marketplace.
“I am perplexed and again disappointed that these have been rejected.
“I am not sure what further evidence the CMA needs to appreciate the extent of this dynamic change which has been substantially accelerated by COVID-19.
“If the CMA’s mission is indeed to ‘make markets work well in the interests of consumers, businesses and the economy’ then I urge the CMA to reconsider its position before making its final determination.
“This transaction will simply not ‘lessen’ competition, let alone ‘substantially’.
“On the contrary, clearance would enable JD to invest in Footasylum and work with its management team to increase the quality, range and choice of products available to its consumers which will bring wider benefits to a UK High Street decimated by a number of high-profile closures.”