JD Sports and Footasylum have been fined almost £5 million after breaching the rules around a merger blocked by the CMA
It is standard practice for the Competition and Markets Authority (CMA) to issue an interim order during an in-depth phase 2 merger investigation. These orders prevent companies from integrating further and ensure they continue to compete against one another as they would have before the deal took place. The CMA imposed this type of order on JD Sports and Footasylum in May 2021.
The order prohibited JD Sports and Footasylum from exchanging commercially sensitive information without prior consent, and required the companies to immediately alert the CMA of any chance that this information may have been shared.
Importantly, the order required that JD Sports and Footasylum put in place robust measures to prevent such breaches and ensure compliance with the order. Upon review, the CMA found that both companies had severely deficient safeguards in place – so much so that they created an environment where information exchanges were almost inevitable.
During 2 meetings, which took place on 5 July 2021 and 4 August 2021, Peter Cowgill, CEO of JD Sports, and Barry Bown, CEO of Footasylum, exchanged commercially sensitive information and then failed to alert or promptly alert the CMA. During these meetings, they discussed:
The sharing of this information had the potential to affect competition in the market and lead to anti-competitive behaviour. In addition, the companies’ subsequent failure to report these breaches significantly impacted the CMA’s ability to act swiftly to stop the information from being shared further, and increased the risk that it could impact future business decisions taken by the companies.
Kip Meek, Chair of the inquiry group investigating the merger, said:
Once the CMA was made aware of the meetings, it used its information gathering powers to try and develop a clearer picture of what had taken place. It requested details from both companies on the number of meetings that had occurred between the companies since July 2020; the topics discussed; any documents involved; and any steps that had been taken to prevent commercially sensitive information being exchanged.
Despite the firms being legally required to respond to these requests, both failed to provide the CMA with all the information it asked for by saying that, at one meeting in December 2020, no documents were exchanged, when this was in fact not true. This impacted the CMA’s ability to conduct its investigation, for which each company have been fined £20,000.
The companies have been fined nearly £4.7 million for the collective breaches, which are split as follows: for failing to have safeguards in place, JD Sports must pay £2.5 million and Footasylum £200,000. For sharing commercially sensitive information, and then failing to alert the CMA, JD Sports will be fined £1.8 million and Footasylum £180,000.
Notes to Editors