The Competition and Markets Authority (CMA) has expressed concern that the JD Sports and Footasylum merger could be bad for competition.
The two sportswear companies agreed terms on a £90 million deal earlier this year, with JD Sports agreeing to purchase Footasylum.
However, the CMA has expressed concern that the loss of competition as a result of the merger could result in customers seeing higher prices, a reduction in the quality of service and less choice both in-store and online.
JD Sports has more than 400 stores in the UK and is the leading sports footwear and fashion company in the country. In 2018 the company saw revenues grow to more than £2.1 billion.
Footasylum generated revenues of almost £200 million last year, and has more than 70 stores in the UK, experiencing significant growth since its first store opened 13 years ago.
Colin Raftery, Senior Director at the CMA, 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.”
JD Sports must address the Competition and Markets Authority’s concerns, and if it is unable to do this, then the merger will then be referred for an in-depth investigation.
Nigel Fry, General Practice Partner at Milsted Langdon, said: “The CMA has taken an interest in this deal because it involves two of the UK’s leading sportswear stores, and it will be a matter of JD Sports justifying the benefits of the merger if they are to avoid a Phase 2 investigation.
“For advice on matters relating to mergers and acquisitions, contact our expert team today.”