Competition watchdog blocks JD Sports takeover of Footasylum for second time leaving high street retailer ‘perplexed’
- CMA says JD Sports and Footasylum deal could be bad for consumers
- Watchdog warns of higher prices and poorer choice for shoppers
- JD hits back at evidence and urges CMA to reconsider as deal is blocked again
High street fashion retailer JD Sports’ acquisition of its competitor Footasylum has been put to a temporary halt by the UK’s Competition and Markets Authority for the second time, with the watchdog concerned that it would lead to a worse deal for shoppers.
The second hurdle placed in front of JD Sports’ takeover of its direct rival has left the group ‘perplexed’ and ‘disappointed’, according to its chairman Peter Cowgill, who has urged the CMA to reconsider its decision.
The CMA previously opted to block the deal earlier this year but this decision was overturned by a tribunal, which forced it to reconsider.
CMA: Takeover of Footasylum could “lead to a worse deal for shoppers”
Having ‘gathered extensive additional evidence’, such as the impact of coronavirus on the fashion sector, the CMA said today that the merger ‘could result in a worse deal for Footasylum shoppers throughout the UK’.
It warned the deal could see customers facing higher prices, with fewer discounts and less choice of products, while the merged entity might invest less in customer service.
According to the CMA’s fact-finding efforts, both companies would continue to be profitable if the merger was blocked, with the watchdog noting that JD Sports ‘was – and continues to be – a particularly close competitor to Footasylum’.
The CMA’s Kip Meek, who chaired the group investigating the deal, said: ‘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.’
The CMA is seeking wider market views before making a final decision in October.
JD Sports shares were flat at 12.30pm at 1,039.5p.
In response to the decision, JD Sports questioned the CMA’s latest evidence gathering and highlighted a failure to appreciate the growth in pandemic-fuelled direct-to-consumer efforts from the likes of Nike and adidas.
The firm said it ‘remains committed to its transaction goal of improving Footasylum’s resources, access to product and differentiated customer proposition’.
JD Sport’s Cowgill added: ‘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.
‘This transaction will simply not ‘lessen’ competition, let alone ‘substantially’.
On the contrary, clearance would enable JD 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.’