Following the launch of an OFT inquiry into the sports retail market, it has emerged that the Serious Fraud Office has begun an investigation into JJB Sports and Sports Direct.
The intervention of the SFO is a dramatic escalation of the controversy involving the two retailers and raises the prospect of jail sentences if criminal activity is discovered.
An SFO spokeswoman told Retail Week that the agency was conducting a “parallel” investigation to the OFT’s, after a referral from the competition watchdog.
She said that the SFO is probing possible offences under the Fraud Act and the Enterprise Act.
The revelation of the OFT’s involvement followed JJB’s disclosure this morning that it has taken concerns about possible cartel activity in the sports retail market to the OFT, which has launched an investigation.
JJB has been granted immunity from any financial penalty in the event that competition rules have been broken, it said.
The OFT investigation follows an approach made by JJB made to the OFT on January 30, following the suspension of then chief executive Chris Ronnie. JJB asked at that time “for immunity pursuant to the OFT’s leniency programme in relation to a suspected agreement or concerted practice to dampen competition in the sports retail market in the period from 8 June 2007 to 25 March 2009, being the period in which the former chief executive, Mr Christopher Ronnie, was employed by the Company.”
JJB did not name any other individuals or companies in its statement today. However, there was frequent speculation during Ronnie’s tenure about the nature of his relationship with Sports Direct and its founder Mike Ashley, for whom Ronnie formerly worked.
JJB said OFT officers visited its Wigan head office this morning.
The retailer said: “The directors take seriously JJB’s obligations under UK competition law and, since approaching the OFT, the company has worked closely, and continues to cooperate fully, with the OFT and all aspects of its investigation.
JJB said that in August the OFT granted “a marker for “Type A” immunity to JJB in respect of the suspected cartel activity”
It may be “some years” before the OFT invesigation is complete. The retailer said: “In the event that the marker, or any subsequent immunity agreement, is withdrawn as a result of JJB’s non-compliance with the conditions or as a result of JJB’s evidence being materially undermined [in particualr circumstances], and an infringement decision is issued by the OFT, JJB may be liable for a fine from the OFT of up to a maximum amount of 10% of the Group’s turnover.”
Sports Direct confirmed that it is assisting both the OFT and the SFO with its investigations
It said in a statement “Sports Direct’s philosophy is to promote competition in the sports and leisure market and its record demonstrates this. Sports Direct continues to offer best value to consumers.”