The UK competition watchdog’s decision to block a takeover of Footasylum by rival retailer JD Sports has been overturned by the Competition Appeals Tribunal.
The Competition and Markets Authority (CMA) previously halted the £90 million deal, warning it could lead to higher prices for shoppers.
However, on Friday, the tribunal said the regulator acted “irrationally” when it ruled in May that the move would lead to a “substantial lessening” of competition nationally.
CMA considers next steps in JD Sports / Footasylum merger: https://t.co/VyRqshDZWd
— Competition & Markets Authority (@CMAgovUK) November 13, 2020
It said the CMA did not follow up on inquiries with suppliers and failed to properly assess the likely impact of the Covid-19 pandemic in its decision.
The tribunal also found that the CMA did not fully understand the increased ability of Nike and Adidas to sell products directly to customers, which affected the decision making.
The case will now go back to the CMA for reconsideration following the judgement.
CMA chief executive Andrea Coscelli said the organisation welcomes the tribunal’s “strong endorsement of its approach to making sure that mergers don’t leave UK shoppers worse off”.
He added: “However, we are disappointed that the tribunal disagreed with the CMA’s approach to information gathering about the specific impact of coronavirus on the sector given the circumstances at that time.
“We will now take stock of today’s judgment and carefully consider our next steps, including whether to appeal.”
Peter Cowgill, executive chairman of JD Sports, said: “We have always maintained that this merger would provide significant long-term benefits to customers, colleagues and brand partners, and so we are very pleased with the Competition Appeal Tribunal’s judgment today.
“The entire case will now go back to the CMA for re-consideration and we look forward to presenting further evidence which demonstrates the true extent to which the competitive landscape has evolved, in particular as a result of the unprecedented challenges caused by the Covid-19 pandemic.”
Earlier this year, JD Sports hit out at the CMA, saying it believed the regulator “failed to meet its objective of protecting consumer interests”.
It said the initial decision would “be detrimental for Footasylum” and its 2,500 staff.
In August, the CMA also slapped JD Sports and shareholder Pentland Group with a £300,000 fine for breaching an order related to the Footasylum deal.