7th Aug 2009 07:00
RNS Number : 0466X
Office of Fair Trading
07 August 2009
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OFT REFERS SPORTS DIRECT'S ACQUISITION OF 31 JJB STORES TO COMPETITION COMMISSION
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The OFT has today referred Sports Direct International plc's acquisition of 31 stores from JJB Sports plc to the Competition Commission as a result of Sports Direct's failure to find a suitable buyer (or buyers) to remedy previously identified competition concerns.
Sports Direct and JJB are the two largest specialist retailers of sports-related clothing, footwear and equipment in the UK. The OFT's investigation earlier this year found that the acquisitions raised competition concerns in five local areas where Sports Direct already had existing stores.
Sports Direct offered to divest stores in these areas to upfront buyers approved by the OFT. The OFT gave Sports Direct three months to agree a sale, which would have solved the competition concerns identified and so prevented a reference to the Competition Commission. However, Sports Direct has not been successful in divesting the five stores within this period and has made no significant progress in doing so.
The OFT does not believe that Sports Direct would be able to arrange sales to suitable buyers even if given a reasonable period of additional time. As such, it is now appropriate to refer the case to the Competition Commission.
Amelia Fletcher, OFT Senior Director of Mergers, said:
'We insisted on an upfront buyer provision in this case because we were uncertain that there were suitable buyers for the stores Sports Direct offered to divest. Its failure to make any real progress towards a sale in three months demonstrates that our caution in requiring an upfront buyer was justified.
'After careful consideration, we have rejected Sports Direct's request for additional time to try to achieve a sale. We are not persuaded that an extension would make a difference in this case, and in these circumstances, the proper course is for the OFT to refer the matter to the Competition Commission'.
NOTES
The OFT's decision as to whether the transaction created a realistic prospect of a substantial lessening of competition (including its decision to suspend its duty to refer the transaction to the Competition Commission to give Sports Direct the opportunity to divest the five stores in an expeditious and timely manner to upfront buyer(s) to be approved by the OFT) was taken on 1 May 2009 and published on 21 May 2009.
The reference test - the OFT has a duty to make a reference to the Competition Commission if it believes that it is or may be the case that a relevant merger situation has been created, and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
Under the Enterprise Act, a relevant merger situation is created if two or more enterprises have ceased to be distinct, and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
Sports Direct purchased the stores from JJB in a series of separate transactions over a two year period. Section 27(5) of the Act gives the OFT the ability to treat a series of transactions between the same parties or interests as having occurred simultaneously on the date on which the latest of them occurred.
Undertakings in lieu of reference - under section 73 of the Enterprise Act, the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. The OFT is required to consult publicly before accepting any such undertakings.
Upfront buyer - the OFT considered that, given the limited number of potential purchasers that might be interested in acquiring the divested stores and that would be able to do so in the five local areas, the divestiture of these stores should be to a suitable purchaser approved by the OFT. The upfront buyer mechanism means that the OFT is able to consult publicly on the suitability of the proposed purchaser, as well as any other aspects of the draft undertakings, during the public consultation period (see note 5 above).
The text of this decision will be placed on the Office of Fair Trading's web site at www.oft.gov.uk as soon as is reasonably practicable.
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