JD Sports angry as Footasylum takeover is blocked
JD Sports Fashion has reacted angrily after the Competition and Markets Authority (CMA) decided to prohibit its acquisition of Footasylum. Given that the company has already taken control of its smaller peer, it means it now has to sell the Footasylum business.
But will a sale happen soon? Not necessarily. JD said it “firmly” believes the CMA has “failed to meet its objective of protecting consumer interests and today's decision will be detrimental for Footasylum, its customers, its 2,500 staff and the UK sports retail market as a whole. We are carefully considering whether to make an application to the Competition Appeal Tribunal to review this decision”.
The company said it "fundamentally disagrees with the conclusion reached by the CMA, which materially fails to take proper account of the dynamic and rapidly evolving competitive landscape in which we operate, as well as the long-lasting — and likely permanent — impact that Covid-19 has had on our industry, which may never return to its pre-merger state, to the particular detriment of smaller retailers like Footasylum”.
It’s hard to disagree with that view at present with Footasylum having been in trouble before the takeover and in a potentially weaker position now as a small player in a sector dominated by big names. It’s also unclear how easy it would be to sell the business in a world dominated by coronavirus economics.
JD’s executive chairman Peter Cowgill also said CMA thinking “continues to rely on an inaccurate and outdated analysis of the UK sports retail competitive landscape, and is underpinned by outdated and flawed customer surveys”.
And in a dig at rival Sports Direct, he added that “the CMA has been taken in by the self-serving testimony of one notoriously vocal competitor".
Saying that the CMA has “failed to properly understand [sector] trends and has completely dismissed any evidence which goes against their pre-judged and erroneous interpretation of our market,” the company highlighted that even without the impact of Covid-19, “the market is, without doubt, materially different today than when the CMA instigated its review 12 months ago”.
It thinks the CMA's decision “becomes even more difficult to comprehend in the context of Covid-19 and the seismic impact it has had on the current UK retail environment; not to mention the enduring challenges that will exist beyond the current lockdown as a result of social distancing and weakened consumer confidence”.
It added that with the UK consumer having shifted online during the lockdown and likely to continue shopping online for the foreseeable future, this is even more of a risk for Footasylum. It said the smaller chain is “an insignificant player in the context of the [online] overall market and heavily dependent on its store estate”.
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