CMA blocks JD Sport merger

The Competition and Markets Authority (CMA) has announced its decision to block JD Sports’ purchase of Footasylum after finding it would “leave shoppers worse off”.

Following an in-depth investigation, the regulator concluded that this transaction would lead to a “substantial lessening” of competition, which would in turn leave shoppers with fewer discounts or a lower quality customer service.

The authority said that whilst retailers were facing “uncertain and challenging” trading conditions amid the pandemic, it has not yet found evidence that the impact of the crisis would remove its competition concerns. 

Nonetheless, the regulator said that the “continuing uncertainty” and “additional challenges” of the current crisis meant it would allow JD Sports sufficient time in which to sell Footasylum.

The CMA said it had analysed a wide range of evidence looking at how closely JD Sport and Footasylum compete, as well as competition from other retailers. It concluded that both groups monitored each other’s activity closely. 

It also found that both retailers shared many of the same clientele, and that Footasylum store openings negatively impacted sales at nearby JD Sports stores. 

The CMA added: “The evidence generally showed a consistent picture: JD Sports and Footasylum are close competitors.”

It concluded that the loss of competition between both groups was important, and the level of competition was “not sufficient to stop shoppers being worse off after the merger”.

According to the authority, the “only way” to address the competition concerns is for JD Sports to now sell Footasylum, in full, to an approved buyer.

Kip Meek, chair of the CMA inquiry group, said: “Our investigation analysed a large body of evidence that shows JD Sports and Footasylum are close competitors. This deal would mean the removal of a direct competitor from the market, leaving customers worse off. 

“Based on the evidence we have seen, blocking the deal is the only way to ensure they are protected. This decision comes at a very difficult time for retailers and we have been careful to consider the effects of coronavirus.” 

He added: “However, we need to make sure we think about the impact of this merger on shoppers, both now and in the foreseeable future and we do not see the effects of the current crisis changing the competitive dynamics in a way that diminishes the substantial lessening of competition which we need to remedy.

“We never take decisions to block mergers lightly, but in this case the evidence has shown it is necessary for JD Sports to sell Footasylum, so that they can continue to compete against each other as independent businesses.”