The merger of JD Sports and Footasylum could threaten competition in the growing sports fashion sector and mean customers lose out both online and in-store, UK competition authorities said this week. Sports Direct, another key player in the market, today added its voice to the debate.
The Competition and Markets Authority (CMA) is now asking 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 interim judgement comes at the end of the first phase of its investigation into the £90m deal.
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.
Colin Rafferty, 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.”
Peter Cowgill, executive chairman of JD Sports Fashion, 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."
Today, competitor Sports Direct said that its legal advice suggested that brand relationships were likely to be a focus for any second phase investigation, including the power of ‘must-have’ brands to control the supply and pricing of their products. It added: “Sports Direct has consistently aimed to provide the widest range of products at attractive prices and will continue to work constructively with all of Sports Direct’s third-party suppliers to enhance its product offering for the benefit of its customers.”
JD Sports is a Leading retailer in IRUK Top500 research, while Footasylum is ranked Top100 and Sports Direct Top150.
Image: Screenshot of JDSports.co.uk