A customer passes trainers at JD Sports Fashion Plc sportswear retail store on Oxford Street in London, U.K., on Thursday, April 28, 2016. With a market value of 2.37 billion pounds ($3.5 billion), JD Sports Fashion Plc has overtaken Sports Direct International Plc, controlled by billionaire Mike Ashley. Photographer: Luke MacGregor/Bloomberg
JD Sports said it rejects the notion that the takeover reduces competition © Bloomberg

Sports Direct has suggested that the UK competition regulator appoint a trustee to sell Footasylum to an industry bidder, such as itself, rather than leave its bitter rival JD Sports to run a disposal process.

The Competition and Markets Authority ruled earlier this month that the already-completed takeover of Footasylum by JD Sports was likely to lead to less competition, and said selling Footasylum “may be the only way of addressing these concerns”.

In documents published in response to the CMA’s preliminary report, “company A” said any acquirer of Footasylum should be independent of JD Sports, capable of competing in the relevant markets and not likely to give rise to further competition concerns.

Two people briefed on the process confirmed that “company A” was Sports Direct, the sportswear empire founded and run by Mike Ashley — which would meet all of the criteria outlined.

It has consistently argued that the combination of JD and Footasylum would be anti-competitive because of JD Sports’ considerable influence with footwear brands such as Nike and Adidas.

“A critical factor in assessing a purchaser’s capability to operate Footasylum as an effective national multichannel retailer and a true competitive force . . . is its ability to ensure that Footasylum continues to have adequate access to supplies of Nike and Adidas ‘must-have’ footwear and apparel products,” it said.

Selling to a buyer without such clout “would achieve the same outcome that [JD Sports] sought to achieve through its acquisition of Footasylum — eliminate one of its closest competitors”.

JD Sports, led since 2004 by executive chairman Peter Cowgill, has previously said that without its intervention Footasylum would have collapsed.

Although Sports Direct has more than 400 stores in the UK, the CMA said in its report that its wider product range and discount image meant it was less of a competitive constraint on JD in footwear than an independent Footasylum with fewer than 100 stores.

US-listed Foot Locker, which has 70 stores in the UK, was also regarded as a greater competitive threat to JD than Sports Direct, according to the CMA.

Sports Direct further suggested that the CMA appoint a “divestiture trustee” to run a Footasylum disposal process because JD Sports would not have sufficient incentive to complete a sale quickly.

Divestiture trustees are a rarely used feature of the UK competition regime. According to lawyers, the last occasion on which the CMA ordered one be appointed was to oversee the sale of Ryanair’s 29.8 per cent in Aer Lingus in 2014.

In its own response to the CMA, JD Sports said it “categorically rejects” the notion that the takeover reduces competition and that it “firmly believes that no remedial action is required”.

Sports Direct did not respond to a request for comment. JD Sports declined to comment. The CMA said it did not comment on investigations still in progress.

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