Competition watchdog blocks JD Sports acquisition of Footasylum for second time, leaving retail chain ‘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 On Evidence And Urges CMA To Reconsider As Deal Is Blocked Again
High street fashion retailer JD Sports’ takeover of competitor Footasylum has been temporarily halted for a second time by the UK’s Competition and Markets Authority, with the watchdog fearing it would lead to a worse deal for shoppers.
The second hurdle to JD Sports’ takeover of its immediate rival has left the group “stunned” and “disappointed,” said chairman Peter Cowgill, who has urged the CMA to reconsider its decision.
The CMA chose to block the deal earlier this year, but this decision was overturned by a tribunal, which forced it to reconsider.
CMA: Footasylum acquisition could “lead to a worse deal for shoppers”
After “collecting extensive additional evidence” such as the impact of the coronavirus on the fashion sector, the CMA said today that the merger “could result in a worse deal for Footasylum shoppers across the UK”.
It warned that the deal could confront customers with higher prices, with fewer discounts and less product choice, while the merged entity could invest less in customer service.
According to the CMA’s investigative efforts, both companies would remain profitable if the merger were blocked, with the watchdog noting that JD Sports “was and remains a particularly close competitor to Footasylum.”
Kip Meek of the CMA, chairman of the group investigating the deal, said: “With this deal, Footasylum would be bought by its closest competitor and as a result, shoppers could face higher prices, less choice and a poorer shopping experience in the UK.” in general.
“While many stores were closed during the lockdown, online sales in this market are stronger than ever, and in-store revenue is coming back as people return to the high street.”
The CMA is seeking broader market views before making a final decision in October.
JD Sports shares were flat at 12:30 p.m. at 1,039.5p.
In response to the decision, JD Sports questioned the CMA’s latest evidence gathering, stressing that it failed to appreciate the growth of pandemic-fueled direct-to-consumer efforts from the likes of Nike and adidas.
The company said it “remains committed to its transactional goal of enhancing Footasylum’s resources, access to products and a differentiated customer proposition.”
Cowgill from JD Sport added: “We made compelling comments about the global brands’ committed positioning towards direct-to-consumer and the resulting impact in an extremely competitive market.
“I am perplexed and again disappointed that these have been rejected. I’m not sure what further evidence the CMA needs to appreciate the magnitude of this dynamic change, which has been significantly accelerated by Covid-19.
This transaction simply will not ‘reduce’ competition, let alone ‘substantially’.
Rather, the approval would allow JD to invest in Footasylum and work with its management team to increase the quality, range and choice of products available to its consumers, bringing greater benefits to a UK high street that is being decimated by a number of high-profile closures.”