JD Sports' buyout of rival could be bad deal for shoppers, says CMA

The UK’s competition watchdog has said JD Sports’ £90m deal to buy its smaller rival Footasylum could result in higher prices and that it will carry out an investigation unless JD can address its concerns.

The Competition and Markets Authority (CMA) said its initial investigation found the deal could result in a “substantial lessening of competition”.

The CMA is concerned this could result in a worse deal for shoppers through higher prices, reduced choice or worsening customer service. “JD Sports must now address the concerns identified or face a further, more in-depth investigation,” it said.

Colin Raftery, a senior director at the CMA, said: “JD Sports is already by far the largest player in the growing sports fashion sector, so any deal that results in it buying up one of its closest competitors could clearly give cause for concern.

“Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match.”

Peter Cowgill, JD Sports’ executive chair, said: “We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business.

“We also believe that there will be significant operational and strategic benefits from a combination of the two businesses. Our discussions with the CMA are ongoing as we consider whether to proceed to phase two or if acceptable remedies can be agreed at this stage.”

Shares in JD Sports fell 2% to 697p after the announcement in Thursday. UK consumers spent more than £5bn on sports clothing and trainers last year, with athleisure styles becoming increasingly popular, particularly among younger people, the CMA noted.

With more than 400 shops, JD Sports is the UK’s biggest retailer of trainers and sports clothing. It owns brands such as Size?, Scotts, Tessuti and Footpatrol and made revenues of more than £2.1bn last year in Britain.

Footasylum, which focuses on selling branded trainers and clothing to 16- to 24-year-olds, has 70 stores and had revenues of nearly £200m in 2018. Both companies have headquarters in Greater Manchester.

Footasylum was founded in Cheshire in 2005 as a single shop by David Makin, who had set up the JD Sports chain with his business partner, John Wardle, in 1981.