The Competition and Markets Authority’s (CMA) decision to block JD Sports’ (JD.L) takeover of Footaslym has been overturned following an appeal.
The Competition Appeals Tribunal said on Friday that CMA acted “irrationally” when it ruled the deal would “substantially” lessen competition.
JD Sports announced plans to buy rival shoe retailer Footasylum for £90m in March 2019. The CMA subsequently blocked the deal in May of this year. The CMA said the deal could “leave shoppers with fewer discounts or receiving lower quality customer service.”
JD Sports appealed the decision and the Competition Appeals Tribunal sided with JD on Friday.
The tribunal said the CMA did not follow up on inquiries with suppliers and failed to properly assess the likely impact of COVID-19. It said the CMA had not properly consider the ability of sportswear brands Nike (NKE) and Adidas (ADS.DE) to boost their direct-to-consumer operations while stores were shut during lockdown.
The CMA said it would “take stock of today’s judgment and carefully consider” next steps, “including whether to appeal.”
“We are disappointed that the tribunal disagreed with the CMA’s approach to information gathering about the specific impact of coronavirus on the sector given the circumstances at that time,” CMA chief executive Andrea Coscelli said.
JD Sports has consistently rejected the CMA’s judgment. The company said in June the watchdog had failed to “take proper account of the dynamic and rapidly evolving competitive landscape in which we operate.”
The retailer also said the CMA failed to take into account the “long lasting and likely permanent impact” that the coronavirus pandemic would have on the industry.
At the time, it said that Footasylum was especially vulnerable to the COVID-19 downturn that hit the majority of UK high street retailers. JD Sports claimed that without a backing from a merger, Footasylum would have entered administration.
The CMA said it found no evidence that COVID-19 would remove its competition concerns.
In August, the watchdog slapped JD and its biggest shareholder with a £300,000 fine for allegedly breaking the CMA’s blocking order on the Footasylum deal. It said JD broke the rules when Footasylum closed a store in Wolverhampton. JD Sports said the potential breach had been made by Footasylum without its’s knowledge.
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