6th May 2020 07:59
(Alliance News) - JD Sports Fashion PLC has been ordered to sell Footasylum after the UK competition regulator blocked its acquisition of footwear retailer.
The FTSE 100 firm's GBP90 million takeover of Footasylum has been under the regulatory microscope for several months due to the Competition & Markets Authority's concerns that the tie-up could lead to a lessening of competition.
JD Sports, which is mulling taking the ruling to a tribunal, said: "The group fundamentally disagrees with the conclusion reached by the CMA in its final report, which materially fails to take proper account of the dynamic and rapidly evolving competitive landscape in which we operate, as well as the long lasting - and likely permanent - impact that Covid-19 has had on our industry, which may never return to its pre-merger state, to the particular detriment of smaller retailers like Footasylum."
JD Sports noted that the UK sports retail sector is among the most "intensely competitive" in the world. It said that not only are pure retailers vying for market share, but "increasingly powerful
direct to consumer operations" of major sportswear brands are too.
"Despite numerous public announcements from direct competitors such as Sports Direct [owned by Frasers Group PLC] confirming that they are elevating their propositions to compete even more closely with JD, alongside the very public and undeniable marked acceleration in adidas and Nike's DTC growth strategies, the CMA has failed to properly understand these trends and has completely dismissed any evidence which goes against their prejudged and erroneous interpretation of our market," JD Sports said.
"Even before considering the impact of Covid-19, the UK sports retail market is, without doubt, materially different today than when the CMA instigated its review 12 months ago. Additionally, the CMA's conclusion becomes even more difficult to comprehend in the context of Covid-19 and the seismic impact it has had on the current UK retail environment."
In March alone, the Office for National Statistics reported that UK retail sales experienced their biggest monthly fall on record amid a big drop in clothing demand.
The CMA has ordered JD Sports to sell Footasylum, but said it would allow it "sufficient time" due to the market turmoil caused by the pandemic.
Explaining its decision, the watchdog said: "It is obvious that coronavirus has led to retailers facing uncertain and challenging trading conditions and the CMA has considered how this might affect the competition concerns surrounding this transaction. While it is significantly affecting the sector, the CMA has not found evidence that the impact of coronavirus would remove its competition concerns."
The CMA said the tie-up would have left customers with "fewer discounts or receiving lower quality customer service".
JD Sports added: "In conclusion, we firmly believe that the CMA has failed to meet its objective of protecting consumer interests and today's decision will be detrimental for Footasylum, its customers, its 2,500 staff and the UK sports retail market as a whole. We are carefully considering whether to make an application to the Competition Appeal Tribunal to review this decision."
By Eric Cunha; [email protected]
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