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March 18, 2020

Footasylum urges competition watchdog to reconsider decision on JD merger

Footasylum has urged the UK competition watchdog to reconsider its decision to block a merger with rival JD Sports.

By Hannah Abdulla

Footasylum has urged the UK competition watchdog to reconsider its decision to block a merger with rival JD Sports.

In a response to the provisional findings by the Competition and Markets Authority (CMA) the sportswear retailer slammed the CMA’s decision which said the deal could be bad for shoppers as it may result in higher prices, fewer choices in stores or reduction in service quality.

The CMA had announced its phase one findings in September following JD Sports’ announcement of a GBP90.1m bid to acquire Footasylum in April of last year.

But last month the CMA published its Phase Two findings in which it said the merger could result in a “substantial lessening of competition” in the retail supply of sports-inspired casual footwear and of sports-inspired casual apparel – both in-store and online – to consumers in the UK. 

JD Sports said the findings were fundamentally flawed. 

Footasylum yesterday (17 March) said the CMA’s provisional conclusions are based on “a very limited selection of evidence…places most weight on its own survey evidence and discounts, misinterprets, misrepresents or ignores a multitude of sources of relevant evidence and submissions provided by the parties.”  

Among its criticisms of the provisional findings, Footasylum argued the CMA applied the “wrong framework” to consider competitive effects and that its assessment of the current and dynamic constraints on the parties “is flawed and outdated due to errors of fact, and fails to consider relevant real-world evidence on rivals”.

It also said its approach to online competitors “is internally inconsistent and flawed” pointing to Asos as an example and noted the CMA saw it as “strongly focused on female customers” which Footasylum says “is irrelevant” as it is a “significantly larger competitor than Footasylum in men’s apparel and men’s footwear.”

It argued the merger would result in “considerable consumer benefits” namely the stabilising of the Footasylum business; the continued employment of its staff; retaining critical supply of Nike and Adidas branded products; maintaining and improving the “front-end” customer-facing aspects; extending to Footasylum JD Sports’ operational and digital/multichannel platform expertise; investment into Footasylum’s existing fashion brands and the development of new own-label and bedroom brands, including the ability to offer Footasylum brands in JD Sports’ international network; and improvements to the efficiency of Footasylum’s operations.

“These benefits to customers will be lost if the erroneous approach of the PFs were crystallised in the CMA’s final report,” it said.

Footasylum urged the CMA to address the flaws in the provisional findings (PFs) and address the evidence presented in its response before ruling there is a substantial lessening of competition.

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