JD Sports and Footasylum fined nearly £5m for breaching merger rules
JD Sports and Footasylum were fined a combined £4.7million for breaking rules preventing companies from working too closely in their proposed merger last year.
Britain’s competition regulator announced on Monday morning that the two sportswear retailers – who had their proposed £90million merger deal blocked in November – exchanged ‘commercially sensitive information’ and did not reported this to the watchdog.
The CMA also said there was a “black hole” linked to meetings between the companies, saying they had “deleted” some recordings of meetings before they could be given to the regulator.
JD Sports bosses have admitted they “inadvertently” received the sensitive information and failed to report it, but hit back at claims they deleted recordings.
In early 2021, the regulator ordered a full phase two investigation into the proposed deal.
During the investigation process, the companies were blocked from onboarding and had to put measures in place to prevent any potential violation of these rules.
However, in November the Sunday Times reported that JD Sports executive chairman Peter Cowgill and Footasylum chief executive 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 inventory for major brands, information on Footasylum’s financial performance, the small retailer’s plans to close six stores and details regarding contract negotiations with the companies. of logistics.
The CMA said these actions “have the potential to affect competition in the marketplace and lead to anti-competitive behavior.”
The regulator also strongly criticized the lack of minutes of these meetings.
Kip Meek, chairman of the investigative panel 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 of these meetings.
“On top of that, neither the CEO nor the General Counsel of JD Sports can provide documentation of the meetings – no notes, no agendas, no emails and poor phone recordings, some of which were deleted before they can be returned to the AMC.
“Had there been proper safeguards in place, we would have been alerted to these breaches in a timely manner and would have had the information necessary to combat them head on.”
In response, JD admitted to inadvertently breaking the watchdog’s rules, but fiercely refuted suggestions that he deleted the phone records.
He said: ‘At no time was there any intent to break the rules, although JD accepts that he inadvertently received limited commercially sensitive information and it was not reported immediately to the CMA.
“However, JD believes that a number of the other conclusions drawn by the AMC are either incorrect or misrepresented through the use of inflammatory language.
“In particular, JD notes that the AMC is suggesting, for the first time, that the phone records were deleted and, while JD accepts that some phone records were unavailable, he absolutely refutes any allegation that this was due to the deliberate deletion of records.”
JD said he does not believe the description of the events or the penalty is a “fair reflection” of his efforts to comply with the rules and said he will “review the details” of the AMC’s decision.