The UK Competition and Markets Authority (CMA) has raised concerns over the proposed merger of sports fashion retailer JD Sports and fashion chain Footasylum saying it could be bad for customers.
The CMA said: “A worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality. JD Sports must now address the concerns identified or face a further, more in-depth, investigation.”
Following the Phase 1 investigation, the CMA said that the merger is could will remove one of JD Sports’ closest competitors.
The CMA also noted that it will launch an in-depth Phase 2 investigation into the merger if the sportswear retailer fails to address its concerns.
In March this year, JD Sports signed an agreement to buy Footasylum for a total consideration of approximately £90.1m ($119.54m).
The company also received shareholder approval for the acquisition in April this year.
UK 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 worse shopping experience for customers.”
JD Sports Fashion executive chair Peter 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.”