The Competition and Markets Authority in the UK has slapped JD Sports and its biggest shareholder with a £300,000 fine for allegedly breaking an order from the watchdog over its purchase of Footasylum.
The CMA said that when Footasylum closed a store in Wolverhampton its new owners had not stuck to the rules.
It slapped the fine on JD and Pentland Group, charging they had “without reasonable excuse, failed to comply in certain respects with the requirements imposed on them by the initial enforcement order issued by the CMA”.
But JD Sports said it strongly disagreed with the CMA’s decision, and is “carefully considering our options”.
It said the potential breach had been made by Footasylum, without JD’s knowledge.
The decision surrounds JD’s £80 million acquisition of Footasylum, which was first made public in March last year when the company made a bid for the shares. A month later the takeover went through.
But, pending an investigation into whether it would let the deal go ahead, the CMA slapped a so-called official enforcement order on the companies.
The order banned them from making any changes to Footasylum’s portfolio of stores without prior permission, among other things.
So on October 23 when a trustee who monitors the process found out that Footasylum was planning to close its site in Wolverhampton the trustee warned bosses to ask for permission first.
But the next day, the CMA says, Footasylum served the break notice with its landlord without telling the trustee or asking for the watchdog’s permission.
Footasylum told the CMA that it was already planning to close the site before the takeover. That would have meant it was not part of the enforcement order, but officials said that they had not been told that in advance.
Footasylum was allowed to continue to operate on its own throughout the period of the order, with its chief executive making all decision, apart for some financial issues for which he needed approval from bosses at JD.
JD Sports said: “We strongly disagree with the CMA’s decision to fine JD Sports for an alleged breach of the ‘hold-separate’ order.
“The terms of the order legally oblige JD and Footasylum to be operated as separate businesses by separate management teams, with the consequent alleged breach relating to an independent decision made by Footasylum management without JD’s knowledge or involvement.
“We are carefully considering our options.”
In May the CMA blocked JD’s takeover of Footasylum, saying it would “leave shoppers with fewer discounts or receiving lower quality customer service”.
JD is appealing the decision.