Authorities wrong to block deal, JD Sports says
Competition authorities in the UK have opposed the proposed acquisition by athletic apparel and footwear retail group JD Sports of shoe chain Footasylum. JD reacted by saying it remains committed to the transaction, which it announced at the start of 2019.
The UK’s Competition and Markets Authority (CMA) blocked the deal in May 2020, but JD Sports appealed the decision. In a statement on September 2, the CMA said it had gathered “extensive additional evidence on the impact of covid-19 and other developments on the sports fashion sector” and had concluded that consumers would receive “a worse deal” if JD Sports took over Footasylum.
“Customers could find themselves facing higher prices, fewer discounts and less choice of products in store,” the CMA said.
It said it wanted to block a merger of the two retail chains and suggested that compelling JD Sports to sell Footasylum would be the best outcome.
But JD Sports has expressed surprise that the CMA’s gathering of extra evidence did not lead it to change its mind. It argued that covid-19 had clearly driven a lot of shoppers to buy online directly from sports brands.
Before the pandemic, JD Sports pointed out, Nike and adidas generated around one-third of their sales from their own direct-to-consumer operations, but have since said that, by 2025, they aim to increase this to 60% of sales for Nike and 50% of sales for Adidas.
It said the market was increasingly being shaped by brands’ direct-to-consumer strategies and insisted this was having a far greater impact on competition in the market than its proposed acquisition of Footasylum.
It argued that “a unique feature of this market” is that retailers rely entirely on brands to supply products but then have to compete against the growing direct-to-consumer operations of the same brands.
JD Sports executive chairman, Peter Cowgill, said: “I urge the CMA to reconsider its position before making its final determination. This transaction will not lessen competition. On the contrary, clearance would enable JD to invest in Footasylum and work with its management team to increase the quality, range and choice of products available to its consumers.”
Image: Footasylum.
