The UK competition regulator has said it still has concerns that JD Sports’ proposed takeover of rival Footasylum could “lead to a worse deal for shoppers”.
It comes after the Competition and Markets Authority (CMA) blocked the £90 million takeover last year but was forced to reassess its decision following an appeal from the sportswear firm.
The CMA said it has provisionally found in its reassessment that blocking the deal, and forcing JD Sports to sell Footasylum to new owners, may be “the only way of addressing” its competition concerns.
JD Sports, which first agreed to buy the 64-site retail brand in March 2019, said it is “perplexed and again disappointed” by the CMA’s findings, accusing the regulator of not adequately considering its submissions regarding the direct-to-consumer sportswear market.
The CMA said it believes a merger between the retailers could see customers facing “higher prices, fewer discounts and less choice of products in store” due to reduced competition.
It added that there were fears the move could also result in the group “investing less in improvements to customer service”.
Kip Meek, chair of the CMA’s group conducting the Footasylum takeover inquiry, said: “Since our original inquiry, we have gathered a significant amount of additional evidence, including on the impact of coronavirus, and we still have concerns about JD Sports’ takeover of Footasylum.
“This deal would see Footasylum bought by its closest competitor and, as a result, shoppers could face higher prices, less choice and a worse shopping experience overall.
“While many stores were closed during lockdown, online sales in this market have been stronger than ever, and revenue from in-store sales is rebounding as people return to the high street.
“JD Sports, Footasylum and others in the sector now have the opportunity to give us their views – on both our provisional decision and our suggested remedy.”
JD Sports responded that clearance for the takeover would allow it to invest in Footasylum and “work with its management team to increase the quality, range and choice of products available to its consumers which will bring wider benefits to a UK high street decimated by a number of high-profile closures”.
Peter Cowgill, executive chairman and founder of JD Sports, said: “We have made compelling submissions on the committed positioning of the global brands towards direct to consumer and the consequent impact on an extremely competitive marketplace.
“I am perplexed and again disappointed that these have been rejected.
“I am not sure what further evidence the CMA needs to appreciate the extent of this dynamic change which has been substantially accelerated by Covid-19.”