UK watchdog forces JD Sports to sell Footasylum

Following an investigation, the Competition and Markets Authority (CMA) has ordered JD Sports to sell Footasylum.

The UK competition watchdog found that the takeover could lead to a “substantial reduction in competition” and a worse deal for Footasylum customers.

JD Sports disagreed with the regulator, suggesting that its most important competitors are now the direct to consumer operations of the international brands themselves rather than Footasylum, which it said has a market share of less than 5 per cent.

Following the CMA’s final decision to block the merger between JD Sports and Footasylum in May 2020, JD Sports appealed to the Competition Appeal Tribunal, which remitted the case back to the CMA for reconsideration.

The regulator said that it found JD Sports is the closest alternative for shoppers at Footasylum, adding that it expects this to continue to be the case even after taking into account the continued growth in online shopping, including on the websites and apps of brands such as Nike and adidas.

Fifty per cent of online shoppers surveyed by the authority said they would go to JD Sports if they were unable to shop at Footasylum for clothing, while 43 per cent said they would the make the switch if they could no longer buy footwear from Footasylum.

"The UK boasts a thriving sports fashion market and today’s decision reflects our commitment to keeping it that way," said Kip Meek, chair of the CMA inquiry group. "We strongly believe shoppers could suffer if Footasylum stopped having to compete with JD Sports. It is likely they would pay more for less choice, worse service and lower quality."

Ultimately the authority decided that the merger would mean that Footasylum would no longer face competition from JD Sports so customers would have fewer options and could face higher prices, fewer discounts, and less choice of products in-store.

The sportswear giant argued that the merger does not create a substantial lessening of competition for JD Sports and so it has no incentive to raise prices or worsen its consumer offer.

"The CMA rightly concludes that, following the acquisition of Footasylum, JD would have no incentive to raise prices or worsen its offer as its most important competitors are the DTC operations of the international brands themselves,” said Peter Cowgill, executive chairman of JD Sports Fashion. "However, the CMA has then somehow concluded that the competitive threat from DTC does not extend to Footasylum and that JD would have an incentive to worsen the offer in Footasylum to the detriment of both consumers and suppliers. We would suggest that the CMA is in a minority of one in reaching this conclusion.”

Cowgill added: "Overall, the CMA's decision today continues to be inexplicable to anyone who understands what difference the pandemic has made to UK retail and how competition and the supply chain in our markets actually work. It is deeply troubling at a time when the UK high street has been seriously damaged already and is vulnerable to further closures."

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