JD expresses frustration over CMA’s ruling to sell Footasylum
The CMA concluded that with less than 5% of the market, Footasylum is not subject to the same competitive pressures and discipline from Nike and adidas DTC that affects the remaining 95%+ of the market
JD Sports Fashion Plc has expressed its frustration after the announcement earlier today from the Competition and Markets Authority (CMA) that it must sell Footasylum Limited.
It claimed this is “the first time ever” that the CMA (including its predecessors) has decided to block or remedy a deal between competitors where it found that there will be no “substantial lessening of competition” in relation to the acquiring business.
According to JD, given the “critical areas” in which the CMA agrees with the retailer and the fundamental change in its conclusion between the two inquiries, the decision to prohibit the acquisition “defies logic”.
According to the CMA, it concluded that market developments have resulted in Footasylum becoming a “weaker constraint” and other competitors becoming stronger and more JD Sports customers now consider Nike, Foot Locker and Adidas as their alternatives than they do Footasylum.
JD will no longer be able to invest in and improve Footasylum’s customer proposition, “as it has always intended to do”.
Kip Meek, chair of the CMA inquiry group, said: “The UK boasts a thriving sports fashion market and today’s decision reflects our commitment to keeping it that way. We strongly believe shoppers could suffer if Footasylum stopped having to compete with JD Sports. It is likely they would pay more for less choice, worse service and lower quality.
“The evidence we have analysed shows that JD Sports and Footasylum are adapting well to market conditions and would continue to be profitable should the merger not go ahead. As separate, rival entities, these companies can continue to compete for shoppers online and as they return to the high street.”
Peter Cowgill, executive chairman of JD Sports Fashion Plc, added: “The CMA has somehow concluded that the competitive threat from DTC does not extend to Footasylum and that JD would have an incentive to worsen the offer in Footasylum to the detriment of both consumers and suppliers. We would suggest that the CMA is in a minority of one in reaching this conclusion.
“Overall, the CMA’s decision today continues to be inexplicable to anyone who understands what difference the pandemic has made to UK retail and how competition and the supply chain in our markets actually work. It is deeply troubling at a time when the UK high street has been seriously damaged already and is vulnerable to further closures.”
