30th Oct 2019 08:57
(Alliance News) - Sports Direct International PLC said Wednesday it has reviewed the Competition & Markets Authority decision to refer the JD Sports Fashion PLC acquisition of smaller competitor Footasylum for a more in-depth Phase 2 investigation, questioning the market share ascribed to Sports Direct by the UK regulator.
At the beginning of October, the competition watchdog said it believes the GBP90 million deal could lead to substantially less competition in the sportswear market where the two firms operate. It issued an initial enforcement order in May commenced its probe into the deal in July.
The order means JD Sports and Footasylum are prevented from integrating their businesses, despite the acquisition having already completed and Footasylum shares being delisted in London.
Last week, the CMA issued a more detailed report on its decision, and Sports Direct said on Wednesday that this contained "inaccurate" estimates of Sports Direct's share of the supply of sports casual wear.
In its report, the CMA found the acquisition was likely to result in "a worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality" as "the merging businesses are two of a smaller number of firms who have the brand relationships and market presence to be able to credibly meet the demands of sports fashion customers."
Sports Direct took umbrage with this assessment, however, referring to the CMA's own report where it said Sports Direct has a "differentiated product offering" from JD Sports and Footasylum and has experienced a "lack of access to special make ups, exclusive and or high-end, premium products".
The company continued: "However, despite these findings, Sports Direct further notes that the CMA has nevertheless published inaccurate estimates of Sports Direct's share of the supply of 'sports-inspired casual apparel and also footwear', both on an in-store and online basis, which wrongly suggest that Sports Direct would have a comparable share of supply to the merged parties."
Sports Direct said it disagrees with these estimates, saying they "substantially" overstates the presence of Sports Direct apparel in these markets.
"Sports Direct does not have a meaningful, if any, presence in these markets for the reasons articulated by the CMA in the decision," the company said.
Chief Executive Mike Ashley aded: "I have been watching this from the side lines to date and now having had the opportunity of considering the CMA decision, I would now welcome the opportunity to provide the CMA with the correct market data. For example, our market share of Adidas Originals in Sports Direct is virtually zero."
The company said it hoped the percentages would be corrected during the course of the CMA's phase II investigation.
Shares in Sports Direct were 1.5% lower in London on Wednesday morning at 313.41 pence each. JD Sports was down 0.5% at 768.20p.
By Paul McGowan; [email protected]
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