7th Jun 2022 09:23
(Alliance News) - JD Sports Fashion PLC, Rangers Football Club and the latter's branded clothing manufacturer have provisionally been found guilty of price-fixing, the UK's competition watchdog said on Tuesday.
JD Sports said it plans to recognise a GBP2 million provision in its financial statements for the year ended January 29. The figure is the athleisure firm's "best estimate" for the liabilities involved with the matter, including legal costs.
Shares in the company were 1.9% lower at 120.90 pence each in London on Tuesday morning.
JD Sports, Rangers and LBJ Sports Apparel Ltd, which trades as Elite Sports, broke "competition law by fixing" prices for products branded by the Scottish football club from September 2018 "until at least" July 2019, the Competition & Markets Authority said.
Over this period, Elite was the manufacturer of Rangers-branded clothing. It sold these products through Gers Online and also in bricks-and-mortar shops in Glasgow and Belfast. JD Sports, meanwhile, was the only UK-wide major retailer selling these products at the time.
The CMA said Rangers was concerned that JD Sports was selling club-branded goods at a lower price than Elite. Elite at the time was seen as the club's "retail partner", the CMA said.
"This resulted in an understanding between the 3 parties that JD Sports would increase its retail price of the Rangers adult short-sleeved home replica shirt by nearly 10%, from GBP55 to GBP60, to bring it in line with the prices being charged by Elite on Gers Online," the CMA explained.
"The CMA is also concerned that Elite and JD Sports - without involvement from Rangers - colluded to fix the retail prices of Rangers-branded clothing, including training wear and replica kit, over a longer period. This included aligning the level and timing of discounts towards the end of the football season in 2019, to avoid competition between them and protect their profit margins at the expense of fans."
Both JD Sports and Elite have pleaded guilty to "cartel activity". Should they continue to cooperate with the CMA's probe, they will receive a reduction in financial penalties.
The CMA cautioned that any firm found to have been guilty of infringing the Competition Act 1998 can be fined up to 10% of its annual revenue. For the year that ended January 30, 2021, JD Sports achieved revenue of GBP6.17 billion.
The CMA's Director of Enforcement Michael Grenfell said: "We don't hesitate to take action when we have concerns that companies may be working together to keep costs up. Football fans are well-known for their loyalty towards their teams. We are concerned that, in this case, Elite, JD Sports and, to some extent, Rangers, may have colluded to keep prices high, so that the two retailers could pocket more money for themselves at the expense of fans."
JD Sports, for its part, said the findings reported on Tuesday are "only provisional".
"The group will now review them with its advisers. The CMA will consider any representations that are made before issuing its final findings. As the CMA has noted, JD has co-operated fully with the CMA and, provided this continues, JD will receive a reduction on any financial penalties that the CMA may decide to impose," JD Sports explained.
It added that its results for the year ended January 29, 2022, which will include a GBP2 million provision related to the matter, will be released "shortly".
It is not the first time JD Sports has faced regulatory scrutiny. Back in February, JD Sports and one-time acquisition target Footasylum were fined nearly GBP4.7 million for collective breaches of an interim order issued by the CMA during an in-depth phase two merger investigation.
JD Sports acquired Footasylum back in March 2019 for GBP90.1 million, but the deal was subject to CMA investigations and orders related to the buy. In November last year, the CMA ordered JD Sports to sell the footwear seller to address concerns about competition and to protect consumers.
The CMA imposed an interim order in May 2021 to stop the companies from "further integration" and ensure they remained competitors during a probe of the tie-up.
The order required the CMA to be immediately notified if any information was exchanged.
The CMA said JD Sports and Footasylum had "severely deficient safeguards in place - so much so that they created an environment where information exchanges were almost inevitable". The CMA alleged two meetings took place in July and August of 2021, where the two chief executive officers, Barry Brown of Footasylum and Cowgill of JD, exchanged commercially sensitive information - on topics such as contracts, planned store closures, stock issues and financial performance. The CMA said it was not notified.
JD in response said any exchange of information was "limited" and "inadvertent" but conceded it was not reported to the CMA.
In May, JD Sports parted company with its executive chair. The retailer said Peter Cowgill left the role with immediate effect. Back in July of last year, the company bowed to shareholder pressure over its corporate governance, agreeing to split its chair and CEO roles.
Cowgill had served as both executive chair and CEO of JD Sports, since taking up the latter position in 2014.
By Eric Cunha; [email protected]
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