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JD Sports plan to buy Footasylum faces further scrutiny from UK regulator

The U.K.'s competition watchdog said Sept. 19 that JD Sports Fashion PLC's £90 million proposed acquisition of apparel retailer Footasylum PLC would face further regulatory scrutiny unless JD Sports addresses the competition authority's initial findings the deal would result in higher prices, worse choice and reduced service quality for customers.

The Competition and Markets Authority, or CMA, in its initial, or phase 1, probe, said that it was concerned the merger would remove one of JD Sports closest competitors.

"Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the U.K., with a sports fashion offering that few other retailers are able to match," said Colin Raftery, senior director at the CMA.

"That's why we're concerned this deal could lead to higher prices, less choice and a worse shopping experience for customers," Raftery added.

A phase 2 investigation would examine whether a merger had, or could be expected to, result in a substantial lessening of competition and whether action should be taken to remedy, mitigate or prevent the impact.

In a statement, Peter Cowgill, executive chairman of JD Sports, said: "Our discussions with the CMA are ongoing as we consider whether to proceed to Phase 2 or if acceptable remedies can be agreed at this stage. We look forward to working constructively with the CMA in this regard and will provide further updates in due course."

Cowgill added that JD Sports considered the transaction, announced March 18, offered "significant operational and strategic benefits."

"We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business," Cowgill said.

In midday trading in London, JD Sports shares traded down 15.40 pence, or 2.2%, at 697 pence.