Competition chief bares his teeth

JD Sports deal just the latest to be questioned by watchdog

JD Sports has blasted Britain’s competition watchdog after it moved to block the retailer’s takeover of Footasylum.

But, baring its new-found teeth, the Competition and Markets Authority (CMA) warned the deal could leave shoppers worse off.

Following a six-month investigation, the CMA said it may now force JD Sports to sell Footasylum less than a year after it bought the chain for £90m. The decision will come as a victory for sportswear tycoon Mike Ashley, who owns rival Sports Direct.

Last September, just weeks after the CMA said it would look into the merger, Ashley stirred the pot by telling the regulator that JD Sports and Footasylum had an even more dominant presence in some markets than it had estimated.

Sources said JD Sports boss Peter Cowgill was ‘furious’ with the decision. Cowgill said: ‘The provisional decision is fundamentally flawed and demonstrates a complete misunderstanding of our market to an alarming extent, given its sixmonth review.

‘The competitive landscape described by the CMA is one which neither I, nor any experienced sector analyst, would recognise. Just take a walk down any major UK high street or search for Nike or Adidas trainers on Google and you can see for yourself how competitive this marketplace really is.’

The competition watchdog has been criticised in the past for its inaction. When it waved through Tesco’s acquisition of Booker in 2017, smaller wholesalers said they would be forced out of business. And following an 18-month probe into the banking sector in 2015, industry figures called the CMA’s proposals ‘inadequate’ while MPs said the watchdog had missed a chance for reform.

But since the former chairman of the Treasury Select Committee, Lord Tyrie ( pictured), joined to lead the CMA in 2018, the body seems to be taking a tougher stance. In the last year it has blocked the much-anticipated merger of Sainsbury’s and Asda, and launched probes into the merger of Takeaway and Just Eat, and Amazon’s investment in food delivery firm Deliveroo.

In total, 12 of the 17 deals which the CMA has referred for an indepth investigation over the last year have been blocked, provisionally blocked or abandoned.

The CMA said it was concerned that if JD Sports and Footasylum combined, shoppers would see fewer discounts and promotions. Kip Meek, chair of the independent inquiry group which led the CMA’s investigation, said: ‘We’re currently concerned that shoppers could lose out after the merger, for example through fewer discounts and less choice in stores and online.

‘This could particularly affect younger customers and students, who shop in JD Sports and Footasylum.’

Neil Wilson, analyst at Markets, said: ‘I think Tyrie is a bit more willing to go for it – he seems to be more interventionist.

‘If the CMA is tilting towards favouring the consumer over businesses then it is probably fulfilling its duty.’

But Greg Lawless, a retail analyst at Shore Capital, criticised the CMA for failing to take into account the power of Nike and Adidas to sell directly to consumers.

Lawless said: ‘This is the most bizarre decision we have seen in a long time from the CMA. They should be called the Comedy Markets Authority.

‘Nike deliberately took its items off Amazon because it wanted to sell direct to consumers, but the CMA has decided to ignore this sales channel when calculating JD’s market share.’

Footasylum fell into trouble as poor trading and delays in opening stores squeezed the retailer’s profits.

Lawless said that without the JD Sports takeover, Footasylum could easily have gone bust or found itself operating as an online-only brand, which would have reduced customer choice even further.

JD Sports said: ‘We feel that, in its findings, the CMA has lost sight of its objective to protect consumer interests.’

The CMA will publish a final report on the merger by May 11.