- JD Sports confesses to price-fixing activity
- Retailer sets aside £2 million provision to cover liability
- Fresh blow for shareholders after shock Cowgill departure
Sportswear retailer JD Sports Fashion (JD.) is facing a significant fine from the Competition and Markets Authority (CMA) after the competition watchdog provisionally found that the FTSE 100 company, Elite Sports and Rangers Football Club broke competition law by fixing the retail prices of Rangers-branded replica kits.
Fresh from the probe into JD Sports’ ill-fated takeover of Footasylum, a contributory factor in the departure of long-standing boss Peter Cowgill, the regulator has put the company on the back foot again, with the shares off 1.4% to 121.5p on the price-fixing news.
Though the size of the provision to cover any resulting liabilities is modest at around £2 million, it is an unwelcome distraction as the business looks to reset in the wake of Cowgill’s exit.
PRICE-FIXING FIASCO
The CMA has provisionally found that JD Sports and Elite Sports fixed the retail prices of a number of Rangers-branded replica kits and other clothing products from September 2018 until at least July 2019.
According to the watchdog, Glasgow-based football club Rangers also took part in the alleged collusion, but only to the extent of fixing the retail price of adult home short-sleeved replica shirts from September 2018 to at least mid-November 2018.
All three parties allegedly colluded to stop JD Sports undercutting the retail price of the shirt on Elite’s Gers Online store.
CARTEL CONFESSION
In its statement, the CMA reported that JD Sports and Elite both applied for leniency during the investigation and confessed to cartel activity.
Michael Grenfell, the watchdog’s executive director of enforcement, said: ‘We don’t hesitate to take action when we have concerns that companies may be working together to keep costs up.
‘Football fans are well-known for their loyalty towards their teams. We are concerned that, in this case, Elite, JD Sports and, to some extent, Rangers, may have colluded to keep prices high, so that the two retailers could pocket more money for themselves at the expense of fans.’
£2 MILLION PROVISION
In a terse response, JD Sports stressed: ‘The CMA’s findings are, at this stage, only provisional and the group will now review them with its advisers. The CMA will consider any representations that are made before issuing its final findings. As the CMA has noted, JD has co-operated fully with the CMA and, provided this continues, JD will receive a reduction on any financial penalties that the CMA may decide to impose.’
Based on the information available to JD Sports at this time, the retailer intends to recognise a provision of roughly £2 million in its financial statements for the year to 29 January 2022, which is its ‘best estimate’ of the liability payable including legal costs.
Shares in JD Sports are down 45% year-to-date on concerns over consumer spending and latterly, the surprise departure of long-serving boss Cowgill, who had helped the sports, fashion and outdoor brands retailer to be among the best performing names on the stock market.
