The Competition and Mergers Authority today said it would take its investigation into the merger of JD Sports and Footasylum to a second phase.
The decision follows the CMA’s phase one ruling last month that the £90m deal could mean the two retailers’ online and in-store customers could lose out as competition reduced in the growing sports fashion sector.
At the time, the CMA asked JD Sports to address its concerns or face a more in-depth investigation into the effect on the UK’s £5bn sports clothing and footwear market. The announcement came today that the second phase would now begin, after JD Sports said it could not suggest any appropriate remedies at this time.
JD Sports today said it would co-operate fully with the investigation but it also said that the challenging UK retail market had provided many examples of retailers that had suffered or failed because they could not meet the fast-changing demands of consumers and brand owners. Its aim in buying Footasylum, it said, was to make sure it continued operating on the UK high street and online.
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.”
In its first phase investigation, the CMA said that it was 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 added that while many retailers sold sports clothing and footwear, the two merging businesses were two of a smaller number of firms with the brand relationships and market presence to meet customer demand for sports fashion in a credible way.
JD Sports, a £2bn turnover retailer, has more than 500 stores and already owns brands including Size?, Scotts, Tessuti and Footpatrol as well as its own brand. Footasylum opened its first store in 2006 and now has 70 across the UK, generating close to £200m in 2018.