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Sports Direct says JD Sports probe could have impact for major brands

Sports Direct says JD Sports probe could have impact for major brands
FILE PHOTO: People pass a JD Sports store in London, Britain April 11, 2017. REUTERS/Neil Hall/File Photo -
Neil Hall(Reuters)
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LONDON (Reuters) – British sporting goods retailer Sports Direct <SPD.L> said on Friday an antitrust investigation into rival JD Sports Fashion’s <JD.L> takeover of Footasylum could have implications for the sector’s major players, particularly their relationships with “must-have” brands.

Key suppliers to the industry include Nike <NKE.N>, Adidas <ADSGn.DE>, Puma and Under Armour <UAA.N>.

In July the Competition and Markets Authority (CMA) launched an investigation into JD Sports Fashion’s <JD.L> completed 90 million pound acquisition of smaller rival Footasylum.

The regulator said on Thursday it planned to refer the deal to a deeper phase 2 investigation after finding it could lead to a worse deal for customers due to higher prices, poorer choice in stores or reductions in service quality.

It said JD must address its concerns or face the more in-depth probe.

Sports Direct, which is led by founder Mike Ashley, said it had received legal advice that the issues identified by the CMA regarding brand relationships are likely to be a key focus of any phase 2 investigation.

It said the issues are likely to have wider market implications beyond this transaction “as they appear to highlight the power of the ‘must-have’ brands and potential market-wide practices aimed at controlling the supply and, ultimately, the pricing of their products”.

Sports Direct said it would continue to work constructively with all of its third-party suppliers.

Analysts said Sports Direct has long been irked by the major brands favouring JD Sports with their best ranges.

They said that as Sports Direct is pursuing what it calls its “elevation” strategy, seeking to get more access to the major brands’ latest and higher tier products, it was in its interests to stir things up with the regulator.

Shares in Sports Direct were up 1.2% at 0741 GMT, while JD was up 0.3%.

(Reporting by James Davey; Editing by Jan Harvey)

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