The UK’s competition watchdog has blocked sportswear retailer JD Sports from taking over rival Footasylum, saying the purchase would leave shoppers worse off.
The Competition and Markets Authority (CMA) said the £90m deal would leave shoppers with fewer discounts and lower quality customer service.
JD Sports hit back, saying it “fundamentally” disagreed with the CMA.
The company said the watchdog had not properly taken account of the market.
It said retailers not only compete with each other, but with big online businesses, and big sportswear manufacturers selling directly to consumers.
It also warned that the impact of the Covid-19 crisis would have a particularly detrimental effect on smaller retailers such as Footasylum.
JD Sports executive chairman Peter Cowgill said: “We fundamentally disagree with the CMA’s decision, which continues to rely on an inaccurate and outdated analysis of the UK sports retail competitive landscape, and is underpinned by outdated and flawed customer surveys.”
JD said it was considering an appeal and that, in the context of the coronavirus-driven pressures on retailers, the decision put the future of Footasylum at risk.
However, the CMA said that while it was “obvious that coronavirus has led to retailers facing uncertain and challenging trading conditions”, that did not remove its competition concerns.
It said it had looked at a wide range of evidence on how closely JD and Footasylum compete, along with competition from other retailers.
In two large surveys of the firms’ customers, it found that “many JD Sports and Footasylum shoppers see the other firm as their next best alternative”.
Kip Meek, chair of the CMA inquiry group, said: “Our investigation analysed a large body of evidence that shows JD Sports and Footasylum are close competitors.
“This deal would mean the removal of a direct competitor from the market, leaving customers worse off. Based on the evidence we have seen, blocking the deal is the only way to ensure they are protected.”
He added that the decision “comes at a very difficult time for retailers” and that the CMA been “careful to consider the effects of coronavirus”.