The Competition and Markets Authority (M&A) has intervened in the completed merger of popular fashion retailers JD Sports and Footasylum.
The CMA said a provisional review revealed that shoppers could be left “worse off” as a result of the takeover.
The review, which forms part of the regulator’s ‘Phase 2’ investigation, shows that the deal would “substantially” lessen competition nationally, resulting in shoppers seeing fewer discounts, clearances and Black Friday promotions, as well as a lower quality of customer service.
The £90 million deal, proposed and completed last year, saw retail giant JD Sports add 70 Footasylum stores to its existing 375 store estate. Both stores sell sports-inspired casual wear, which has rocketed in popularity over the past decade. According to official statistics, UK customers spent more than £5 billion on sports clothing and footwear in 2018.
However, CMA research indicates that UK shoppers only consider buying sports clothing and footwear from a small number of retailers, two of those being JD Sports and Footasylum.
Commenting on the report, Kip Meek, Chair of the independent inquiry group leading the investigation, said: “This is a large and growing market in the UK, so it is important that the CMA carefully scrutinises a deal between two key rival businesses.
“We’re currently concerned that shoppers could lose out after the merger, for example through fewer discounts and less choice in stores and online. This could particularly affect younger customers and students, who shop in JD Sports and Footasylum.”
The CMA could now take preventative action against the merger, with blocking the deal and forcing JD Sports to sell of Footasylum stores being one option.
Hitting back at the regulator, however, JD Sports said the review was “flawed”.
“The CMA’s provisional decision is fundamentally flawed and demonstrates a complete misunderstanding of our market to an alarming extent, given its six-month review,” said JD Sports executive chairman Peter Cowgill.
“The competitive landscape described by the CMA is one which neither I, nor any experienced sector analyst, would recognise.
“Just take a walk down any major UK High Street or search for Nike or Adidas trainers on Google and you can see for yourself how competitive this marketplace really is.”
The deadline for the CMA’s final report has been extended to 11 May 2020.