JD Sports fury as regulators order chain to sell Footasylum
JD Sports has been ordered to sell Footasylum after serious concerns that competition would be reduced following an in-depth investigation.
The Competition and Markets Authority (CMA) said the Bury-headquartered giant is “by far and away” the closest alternative for shoppers at Footasylum and ordered the listed group to sell it.
The move follows a second investigation by the agency after JD Sports appealed against a previous ruling, saying investigators failed to take into account online sales through Nike and Adidas in the UK.
But the CMA said it expects JD Sports’ £90m takeover of Footasylum would continue reducing competition even after taking into account the growth in online shopping.
According to the watchdog, 50% of online shoppers surveyed said they would go to JD Sports if they were unable to shop at Footasylum for clothing. A further 43% said they would the make the switch if they could no longer buy footwear from Footasylum.
As Footasylum would no longer face competition from JD Sports, customers would have fewer options and could face higher prices, fewer discounts, and less choice of products in-store.
Footasylum was purchased by JD Sports in a takeover announced in April 2019.
Peter Cowgill, executive chairman of JD Sports said it was not fair for the CMA to conclude that “JD would have an incentive to worsen the offer in Footasylum to the detriment of both consumers and suppliers.”
Both brands are focusing on direct to consumer (DTC) sales).
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.”
JD said it was studying the report in detail and would carefully consider its options accordingly.
Russ Mould, investment director at AJ Bell said: “The shoe market is well served by a range of retailers in the UK, so it does seem odd that the CMA is being so stubborn. Quite often in these situations, the company being investigated would be forced to sell some of the acquired shops in certain geographical locations, but not necessarily the entire business.
“JD Sports is unlikely to let the CMA have the final word and it now seems that Cowgill is on a personal mission to emerge victorious. It’s now a fight of principles and not letting the CMA set the precedent for future cases of a similar ilk.”