JD Sports and Footasylum have been fined a combined £4.7 million over breaching rules stopping the firms working too closely amid their proposed merger last year.
The UK competition regulator announced on Monday morning that the two sportswear retailers – which saw their proposed £90 million merger deal blocked in November – exchanged “commercially sensitive information” and failed to report this to the watchdog.
The CMA also said there was a “black hole” related to meetings between the businesses, saying they had “deleted” some records of the meetings before these could be given to the regulator.
Bosses at JD Sports admitted to “inadvertently” receiving the sensitive information and failing to report it, but struck back at claims it deleted records.
In May 2019, JD Sports first confirmed it had agreed the deal to buy its rival high street retailer, but the move was stalled significantly as the CMA investigated whether it would affect wider competition and potentially hit customers.
Early in 2021, the regulator ordered an in-depth phase two investigation into the proposed deal.
Amid the investigation process, the firms were prevented from integrating at all and were expected to put measures in place to prevent any potential breaches of these rules.
However, in November, the Sunday Times reported that JD Sports’ executive chairman Peter Cowgill and Footasylum chief executive officer Barry Brown met in a Bury car park.
The CMA has now confirmed that the two bosses shared commercially sensitive information during two meetings, which took place on July 5 and August 4.
During the meetings they discussed Footasylum’s problems securing stock from key brands, information about Footasylum’s financial performance, plans for the smaller retailer to shut six stores and details regarding contract negotiations with logistics firms.
The CMA said these actions “had the potential to affect competition in the market and lead to anti-competitive behaviour”.
The regulator was also highly critical of the lack of records for these meetings.
Kip Meek, chair of the inquiry group investigating the merger at the CMA, said: “There is a black hole when it comes to the meetings held between Footasylum and JD Sports.
“Both CEOs cannot recall crucial details about these meetings.
“On top of this, neither CEO or JD Sports’ general counsel can provide any documentation around the meetings – no notes, no agendas, no emails and poor phone records, some of which were deleted before they could be given to the CMA.
“Had there been proper safeguards in place, we would have been alerted to these breaches in good time and would have had the necessary information to tackle them head on.”
In response, JD admitted to inadvertently breaking the watchdog’s rules but fiercely refuted suggestions it deleted phone records.
It said: “At no point has there been any intention to breach the rules, although JD does accept that, inadvertently, it was in receipt of limited commercially sensitive information and that this was not reported to the CMA immediately.
“However, JD believes that a number of the further conclusions which the CMA have drawn are either incorrect or have been presented in a misleading manner through the use of inflammatory language.
“In particular, JD notes that the CMA are suggesting, for the first time, that phone records have been deleted and, whilst JD accepts that some phone records were not available, it absolutely refutes any allegation that this was due to records being deliberately deleted.”
JD said it does not believe the description of events or the penalty are a “fair reflection” of its efforts to comply with the rules and said it will “review the detail” of the CMA decision.
