1st Oct 2019 09:16
(Alliance News) - The UK competition regulator on Tuesday referred the JD Sports Fashion PLC acquisition of smaller competitor Footasylum for a more in-depth Phase 2 investigation.
Shares in JD Sports were down 1.5% at 740.20 pence in London in morning trade.
The UK Competition & Markets Authority 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.
In response, JD Sports argued that there was "clear evidence" the acquisition would not shrink competition to a substantial degree and said it "does not consider that there are any appropriate remedies that can be offered at this time to avoid a reference to Phase 2".
The CMA said it had determined that the JD Sports acquisition of Footasylum "has resulted or may be expected to result in a substantial lessening of competition" in the UK. JD Sports was offered the opportunity to "offer an undertaking" to remedy this finding, but its decision not to do so means the CMA referred the merger for Phase 2, the regulator said.
JD Sports Executive Chair Peter Cowgill said: "The CMA has referred their review of this acquisition to Phase 2 on the basis that it could be bad for competition and may have an impact on price. I strongly disagree with this. This transaction will not result in any price increases or a reduction in product ranges or service quality. The focus of all of our group businesses is to ensure we deliver a best in class, multichannel experience to our consumers by offering a compelling product proposition."
JD Sports said it plans to work with the CMA to "firmly establish that both JD and Footasylum operate in an extremely competitive and dynamic retail market and that they will continue to face strong competition following the acquisition."
On September 20, JD Sports competitor Sports Direct International PLC weighed in on the CMA probe, saying it could have possible "wider market implications". Sports Direct was up 0.5% following the decision Tuesday.
By Anna Farley; [email protected]
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