JD Sports may have to sell Footasylum after new ruling by oversight body | JD Sports Fashion

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JD Sports may be forced to sell Footasylum after the UK’s competition regulator once again ruled that the acquisition would lead to an even worse deal for sportswear shoppers – even after switching online during the pandemic.

JD Sports agreed to buy Footasylum in March 2019 for £90m, but it has been an arduous process since then, as the Competition and Markets Authority has repeatedly tried to block it.

The CMA had previously attempted to stop the merger, but its initial ruling was sent in November 2020 by the Competition Court of Appeal, which found the regulator had acted “irrationally”. A key aspect has been the CMA’s failure to assess the changes brought about by the pandemic, such as an increase in the number of shoppers buying directly from manufacturers online.

In its latest interim findings, the CMA noted that the pandemic has changed shopping habits, citing the growing influence of major brands such as Nike and Adidas selling directly to consumers online.

However, it said competition over price, quality, range and service levels on footwear and apparel could still fall as a result of the deal, and that high street revenues had rebounded since the easing of coronavirus restrictions.

The two retailers shared deep connections before the merger. John Wardle and David McCain founded the first JD Sports store together in Mosley, Lancashire, in 1981. They left the listed company after 20 years in 2005, and McCain tried to repeat the trick with Footasylum. Wardle rejoined McCain in 2008 and rose to CEO and then Chairman of the Board before leaving in 2018.

JD Sports has grown to become one of the UK’s most valuable retailers, with a market capitalization of £10.7 billion, earning it a spot in the FTSE 100. The CMA said both companies would continue to make profits as separate retailers. “JD Sports has been – and remains – a particularly close competitor for Footasylum,” CMA said.

Kip Meek, head of the CMA group conducting this investigation, said: “Since the original investigation, we have collected a significant amount of additional evidence, including the impact of the coronavirus, and we continue to have concerns about JD Sports’ takeover of Footasylum.

“This transaction will see Footasylum purchased by its nearest competitor, and as a result, shoppers may experience higher prices, fewer options and an overall worse shopping experience.”

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In a statement to the stock market, Peter Coogill, CEO of JD Sports, said the CMA should “reconsider its position before making its final decision,” adding that he believes the merger will improve the quality, range and choice of products for consumers. He did not mention the possibility of higher prices.

“We have made compelling representations of the committed positioning of global brands directly towards the consumer and the resulting impact on a highly competitive market,” he said.

“I am again puzzled and disappointed that these have been rejected. I am not sure what additional evidence the CMA needs to appreciate the extent of this dynamic change that has been so dramatically accelerated by Covid-19.”

JD Sports will have the opportunity to respond to the CMA, with a final decision due around October. It can then appeal again to the Competition Appeal Court if the CMA confirms its findings.

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