Completed acquisition by JD Sports Fashion plc of Footasylum plc Provisional findings report Notified: 11 February 2020 © Crown copyright 2020 You may reuse this information (not including logos) free of charge in any format or medium, under the terms of the Open Government Licence. To view this licence, visit www.nationalarchives.gov.uk/doc/open-government- licence/ or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: [email protected]. The Competition and Markets Authority has excluded from this published version of the provisional findings report information which the inquiry group considers should be excluded having regard to the three considerations set out in section 244 of the Enterprise Act 2002 (specified information: considerations relevant to disclosure). The omissions are indicated by []. [Some numbers have been replaced by a range. These are shown in square brackets.] [Non-sensitive wording is also indicated in square brackets.] Contents Page Summary of provisional findings ................................................................................ 5 Provisional findings .................................................................................................. 22 1. The reference ..................................................................................................... 22 2. Industry background ........................................................................................... 24 Introduction ......................................................................................................... 24 Overview of the industry ..................................................................................... 24 Key trends ........................................................................................................... 26 Importance of online and in-store .................................................................. 26 Importance of brands and access to products ............................................... 27 Growth in DTC sales ..................................................................................... 27 3. The Parties, the Merger and its rationale ............................................................ 29 The Parties ......................................................................................................... 29 Pentland ........................................................................................................ 29 JD Sports ....................................................................................................... 29 Footasylum .................................................................................................... 31 The Merger ......................................................................................................... 32 Rationale for the Merger ..................................................................................... 33 JD Sports ....................................................................................................... 33 Footasylum .................................................................................................... 33 4. Relevant merger situation ................................................................................... 35 Introduction ......................................................................................................... 35 Enterprises ceasing to be distinct ....................................................................... 35 Enterprises .................................................................................................... 35 Ceasing to be distinct .................................................................................... 35 Turnover test ....................................................................................................... 36 Provisional conclusion ........................................................................................ 36 5. Counterfactual..................................................................................................... 37 Introduction ......................................................................................................... 37 The CMA’s counterfactual assessment framework ............................................. 37 Parties’ views on the appropriate counterfactual ................................................ 38 Our assessment of the appropriate counterfactual ............................................. 39 Impact of Footasylum’s financial position on its ability to compete ................ 39 The Parties’ downside scenario ..................................................................... 43 Provisional conclusion ........................................................................................ 44 6. Overview of our approach and the evidence gathered........................................ 47 Our approach ...................................................................................................... 47 Market definition ............................................................................................ 47 Theories of harm ........................................................................................... 47 Countervailing factors .................................................................................... 48 Evidence gathered .............................................................................................. 49 Evidence from the Parties ............................................................................. 49 Evidence from third parties ............................................................................ 49 Surveys and GUPPIs ..................................................................................... 50 7. Market definition.................................................................................................. 52 Introduction ......................................................................................................... 52 Background ......................................................................................................... 53 General approach to market definition ................................................................ 53 1 Product market definition .................................................................................... 54 Footwear and apparel .................................................................................... 54 Footwear ....................................................................................................... 55 Apparel .......................................................................................................... 65 Geographic market definition .............................................................................. 73 Parties’ views ................................................................................................. 73 Our assessment ............................................................................................ 73 Provisional conclusion on geographic market definition ................................ 77 Provisional conclusion ........................................................................................ 78 8. Our competitive assessment of unilateral effects - footwear ............................... 79 Introduction ......................................................................................................... 79 Approach to our assessment ......................................................................... 80 Role of suppliers ................................................................................................. 81 Parties’ views ................................................................................................. 81 Third parties’ views ........................................................................................ 82 Our assessment ............................................................................................ 83 Provisional view on the role of suppliers ........................................................ 88 How retailers compete ........................................................................................ 89 Parties’ views ................................................................................................. 89 Third parties’ views ........................................................................................ 89 Our assessment ............................................................................................ 90 Provisional view on how retailers compete .................................................... 92 Market shares ..................................................................................................... 92 Parties’ views ................................................................................................. 92 Our assessment ............................................................................................ 93 Retailers’ offerings .............................................................................................. 94 Parties’ views ................................................................................................. 94 Our assessment ............................................................................................ 94 Provisional view on retailers’ offerings ......................................................... 101 Internal documents ..........................................................................................