JD Sports Fashion PLC (LSE:JD.) and Footasylum have been fined almost £5mln by the UK financial watchdog for breaking merger rules, though the deal has since collapsed.
The Competition and Markets Authority (CMA) said the fine followed the issuing of an interim order in May last year, during a phase 2 merger investigation, which prevents companies from integrating further and continuing to compete.
This prohibited the two companies from exchanging commercially sensitive information without prior consent, forced them to alert the CMA if any information had been shared and required the retailers to implement measures to prevent breaches and ensure compliance.
During two meetings which took place last summer, JD’s chief executive Peter Cowgill and Footasylum’s boss Barry Bown exchanged commercially sensitive information and failed to inform the CMA, a statement said.
It was judged the two discussed, among other things, Footasylum’s financial performance, Footasylum’s issues with stock allocations from key brands and the closure of Footasylum stores.
"It jeopardised our ability to maintain the benefits of a competitive market for shoppers and ensure there is a level playing field for other businesses,” said Kip Meek, chair of the inquiry group.
“This fine should act as a warning – if you break the rules there will be serious consequences,” Meek added.
Once it was made aware the meetings took place, the CMA said it gathered information to develop a clear picture, seeking details from both companies on any discussions that took place since July 2020.
Both failed to provide the CMA with all the information it asked for, despite being legally required to.
The two companies claimed that no documents were exchanged at a meeting in December 2020, which was found to be false, and resulted in a £20,000 fine for each.
Total fines for the two come out to nearly £4.7mln, with JD paying the bulk at £4.3mln, and Footasylum paying the rest.
In December, JD had admit defeat in its merger following months of scrutiny over the deal.