JD Sports’ £90m swoop on high street rival Footasylum is facing an in-depth probe from the competition authorities.
The Competition and Markets Authority (CMA) has referred the proposed acquisition for a phase 2 investigation, after revealing it was “concerned” that the deal could lead to a loss of competition.
The CMA said the purchase “could result in a worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality”.
The watchdog said JD Sports “must now address the concerns identified or face a further, more in-depth, investigation”.
JD, which already operates more than 400 stores in the UK, agreed to acquire Footasylum back in March.
At the time, JD Sports executive chair Peter Cowgill said the move would provide the enlarged group with “significant operational and strategic benefits”.
Footasylum operates around 70 stores, but has floundered since floating in October 2017, when its IPO valued the business at £170m.
Following the CMA’s refrral of the deal to a phase two investigation, Cowgill said: “We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business. We also believe that there will be significant operational and strategic benefits from a combination of the two businesses.
“Our discussions with the CMA are ongoing as we consider whether to proceed to phase 2 or if acceptable remedies can be agreed at this stage.
“We look forward to working constructively with the CMA in this regard and will provide further updates in due course.”
CMA senior director Colin Raftery said: “JD Sports is already by far the largest player in the growing sports fashion sector, so any deal that results in it buying up one of its closest competitors could clearly give cause for concern.
“Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match. That’s why we’re concerned this deal could lead to higher prices, less choice and a worse shopping experience for customers.”