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JD Sports faces further CMA probe over Footasylum acquisition
19th Sep 2019 07:37
(Sharecast News) - Footwear and sports apparel retailer JD Sports Fashion's acquisition of Footasylum was facing a fresh regulatory hurdle on Thursday, as the Competition and Markets Authority confirmed that it intended to refer its review to a phase two investigation.
The competition watchdog said 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 said JD Sports Fashion was now required to address the concerns identified or face a further, more in-depth, investigation.
"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," said CMA senior director Colin Raftery.
"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."
The CMA said its initial investigation found that the merger could remove one of JD Sports' closest competitors.
It explained that, while a wide variety of retailers sold sports clothing and footwear, the merging businesses were two of a smaller number of firms which had the brand relationships and market presence to be able to credibly meet the demands of sports fashion customers.
"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," said JD Sports Fashion's executive chairman Peter Cowgill in response to the CMA's findings.
"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 two 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."
The competition watchdog said 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 said JD Sports Fashion was now required to address the concerns identified or face a further, more in-depth, investigation.
"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," said CMA senior director Colin Raftery.
"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."
The CMA said its initial investigation found that the merger could remove one of JD Sports' closest competitors.
It explained that, while a wide variety of retailers sold sports clothing and footwear, the merging businesses were two of a smaller number of firms which had the brand relationships and market presence to be able to credibly meet the demands of sports fashion customers.
"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," said JD Sports Fashion's executive chairman Peter Cowgill in response to the CMA's findings.
"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 two 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."