JD Sports’ takeover of Footasylum is facing greater scrutiny after the competition watchdog warned it may could result in “a worse shopping experience for customers”.
The Competition and Markets Authority will refer the £90m deal to a “phase 2” investigation, which means it will take a more in-depth look at the tie-up.
JD Sports was “by far” the biggest firm in the sports fashion sector, it said.
A combination could push up prices and lessen choice for shoppers.
Peter Cowgill, executive chairman of JD Sports Fashion, said: “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.”
He said the company would continue to hold talks with the CMA about whether it will take action to address its competition concerns or go ahead with a phase 2 investigation.
JD Sports has about 400 stores and owns a number of other High Street brands such as Size?, Scotts, Tessuti and Footpetrol.
Footasylum has some 70 stores in the UK.
The CMA has already completed a phase 1 review of the deal, concluding that the deal “could remove one of JD Sports’ closest competitors”.
Colin Raftery, senior director at the CMA, said: “Our investigation has shown us that JD Sports and Footasylum have been competing strongly across the UK, with a sports fashion offering that few other retailers are able to match.
“That’s why we’re concerned this deal could lead to higher prices, less choice and a worse shopping experience for customers.”
The watchdog said that the “sports fashion” was a major industry – last year, UK consumers spent more than £5bn on sports clothing and footwear.
It said: “Sportswear is currently a significant influence on fashion trends, with sports styles replacing traditional casualwear, particularly among younger shoppers.”
It said that JD Sports must now address the CMA’s concerns. “If it is unable to do so, the merger will be referred for an in-depth phase 2 investigation.”