Yahoo Finance JD Sports fined over £4m for breaching CMA order in Footasylum takeover
Sportswear retailer JD Sports (JD.L) has been fined £4.3m ($5.8m) for breaching the rules around a merger with Footasylum blocked by the competition watchdog.
The Competition and Markets Authority (CMA) said the two companies had exchanged commercially sensitive information after JD Sports was ordered to unwind its purchase of Footasylum over competition concerns.
The CMA found that despite the interim order issues in May last year preventing the companies from integrating further, JD Sports chief executive, Peter Cowgill, and Footasylum CEO, Barry Brown, shared information such as Footasylum’s financial performance, issues with stock allocations from key brands, and the planned closure of six stores.
Kip Meek, chair of the inquiry group investigating the merger, 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.
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"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."
The companies have been fined nearly £4.7m for the collective breaches. For failing to have safeguards in place, JD Sports must pay £2.5m and Footasylum £200,000.
For sharing commercially sensitive information, and then failing to alert the CMA, JD Sports will be fined £1.8m and Footasylum £180,000.
The watchdog said the sharing of 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."
In a statement issued to the London Stock Exchange (LSEG.L), JD Sports admitted to having access to commercially sensitive information but criticised the regulator’s “use of inflammatory language”.
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"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."
The UK’s largest sportswear retailer also said there was no prohibition on the CEOs meeting and that it was not legally required to inform the watchdog that a meeting had taken place.
