JD Sports chairman Peter Cowgill has accused rival retailer Mike Ashley of “blatantly” furthering his own commercial interests at the expense of customers after the UK’s competition watchdog formally blocked its acquisition of smaller rival Footasylum.
Mr Cowgill said the Competition and Markets Authority’s final determination, which upheld a provisional ruling in February, relied on “an inaccurate and outdated analysis of the UK sports retail competitive landscape” and was “underpinned by outdated and flawed customer surveys”.
“At the same time, incredibly, the CMA has been taken in by the self-serving testimony of one notoriously vocal competitor,” he added, a reference to Mr Ashley’s Sports Direct group.
He said Sports Direct “has blatantly participated in the process for their own commercial interests rather than for the benefit of consumers”.
Mr Ashley’s company is a potential bidder for Footasylum, a chain of 70 sports and fitness stores that JD Sports will now have to sell to a CMA-approved buyer.
In February, Sports Direct suggested that it would be the ideal owner of Footasylum and called upon the CMA to appoint a “divestiture trustee” to oversee any disposal.
The regulator said the takeover, which completed last year, would reduce competition and leave customers worse off.
“Based on the evidence we have seen, blocking the deal is the only way to ensure they are protected,” said Kip Meek, who chaired the CMA inquiry group.
At the heart of the CMA case lay consumer surveys that suggested shoppers regarded Footasylum as a major competitor to JD, despite the difference in size between them.
It also felt that combining the two groups would give JD even more control over high-end products from the likes of Nike and Adidas, given that it is already a key partner of both.
JD Sports will be allowed “sufficient time” to complete the disposal given the impact of the coronavirus lockdown on market conditions.
Some observers had thought that the CMA might soften its stance because of the severe impact that Covid-19 has had on the retail sector and given that Footasylum was already struggling when JD Sports acquired it.
In April, the regulator provisionally approved the takeover of Deliveroo by Amazon, saying there was evidence that Deliveroo would run out of funds if the transaction did not proceed.
Days later, however, the CMA issued an update warning that Covid-19 had not altered the way it assessed mergers involving companies in financial distress.
The pandemic had “not brought about any relaxation of the standards by which mergers are assessed or the CMA’s investigational standards”, it said. Covid-19 arguments would only be accepted as a reason to clear a merger if there was a “material body of probative evidence”.
Mark Jephcott, a competition partner at Herbert Smith Freehills, said the CMA “view seems to be that crises are painful but they pass, whereas clearing a merger is a permanent change . . . Coronavirus has not brought about a new world of failing firm defences”.
The CMA was showing some leniency, however, by granting JD more time to sell Footasylum, lawyers said.
Mr Meek, whose background is telecoms regulation, said the CMA did not see the effects of the current crisis “changing the competitive dynamics in a way that diminishes the substantial lessening of competition which we need to remedy”.
Mr Cowgill, who is considering an appeal against the decision, said the competitive landscape had “changed beyond recognition” as a result of the pandemic.
“We are astounded that the CMA has failed to recognise that this isn’t just a short-term blip, but rather a long-term societal and behavioural change in how consumers shop,” he said.
Additional reporting Kate Beioley
Get alerts on JD Sports Fashion PLC when a new story is published