Tiso owner JD Sports hits back hard as watchdog throws up hurdle to Footasylum deal
Competition officials believe that the proposed deal could result in customers being worse off, with younger shoppers and students particularly hard hit.
The Competition and Markets Authority (CMA) has said its provisional ruling is to block the takeover.
Investigators noted: “JD Sports’ takeover of close competitor Footasylum could leave shoppers worse off, both in store and online. After its initial Phase 1 review raised potential competition concerns, the CMA’s in-depth Phase 2 investigation has provisionally found that the deal substantially lessens competition nationally.”
The CMA added that there could be fewer discounts, lower quality customer service and a more limited choice in stores and online.
The watchdog noted that the sports clothing and footwear market in the UK stood at £5 billion in 2018, and is growing. But with the two rivals merging, shoppers could lose out.
Kip Meek, chairman of the independent inquiry group leading the investigation, said: “We’re currently concerned that shoppers could lose out after the merger, for example through fewer discounts and less choice in stores and online. This could particularly affect younger customers and students, who shop in JD Sports and Footasylum.”
JD Sports now has two weeks to put forward possible remedies, but the CMA added that its “current view is that blocking the deal by requiring JD Sports to sell the Footasylum business may be the only way of addressing these competition concerns.”
A final report is due to be published by 11 May.
JD Sports hit back at the CMA report, saying the findings “do not reflect the intensive and dynamic competitive reality of the UK sports retail market today”.
Peter Cowgill, executive chairman of JD Sports, said: “The CMA’s provisional decision is fundamentally flawed and demonstrates a complete misunderstanding of our market to an alarming extent, given its six-month review.”
Analysts at Shore Capital noted: “We are surprised and disappointed by the CMA provisional findings on the Footasylum acquisition by JD and hope that common sense will prevail. JD is a well-managed company with global aspirations driven by a core UK business that is resonating with consumers.”