JD Sports Fashion PLC (LSE:JD.) is facing another fine from the UK’s competition watchdog for alleged collusion with Elite Sports over the price of Rangers FC merchandise.
The Competition and Markets Authority (CMA) said JD and Elite fixed prices on Rangers replica kits and short-sleeve shirts and colluded with the club to keep the price of replica shirts at £60.
All of the offences took place between September 2018 and July 2019, said the CMA.
At the time, Elite was the manufacturer of Rangers-branded clothing and also sold Rangers-branded products directly through Gers Online Store and other stores in Glasgow and Belfast.
JD Sports was the only UK-wide major retailer selling those products at the time, added the CMA.
The CMA alleges that the Scottish Premiership club became concerned about the fact that, at the start of the 2018-19 football season, JD Sports was selling the Rangers replica top at a lower price than Elite, which was seen at the time as the club’s ‘retail partner’.
“This resulted in an understanding between the three parties that JD Sports would increase its retail price of the Rangers adult short-sleeved home replica shirt by nearly 10%, from £55 to £60, to bring it in line with the prices being charged by Elite on Gers Online.”
The CMA added it was also concerned that Elite and JD Sports – without the involvement of Rangers – colluded to fix the retail prices of Rangers-branded clothing, including training wear and replica kit, over a longer period.
In its statement, the CMA added that Elite and JD Sports applied for leniency during the investigation and confessed to cartel activity.
Any business found to have infringed the prohibitions in the Competition Act 1998 can be fined up to 10% of its annual worldwide group turnover, said the CMA, though in a statement later JD estimated the likely cost of any fine at £2mln.
“The CMA's findings are, at this stage, only provisional and the group will now review them with its advisers,” the retailer added in its statement.
Michael Grenfell, the CMA’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 2 retailers could pocket more money for themselves at the expense of fans.
“These are the CMA’s provisional findings and the companies involved now have the chance to make representations to the CMA before it reaches a final decision.”
It is another blow to JD Sports, which saw executive chairman Peter Cowgill bow out suddenly in May after twenty years in charge.
Earlier this year, the company was hit with a £4.3mln fine by the CMA for rule breaches following the blocking of its takeover of smaller rival Footasylum.
The reason given for Cowgill’s departure was that JD had decided to accelerate the separation of the roles of chair and chief executive.
“In this context sportswear retailer JD Sports could well do without the disruption of another tussle with the Competition and Markets Authority,” said Russ Mould investment director at AJ Bell.
“Fresh from the probe into its ill-fated takeover of Footasylum, which was a contributory factor in the departure of long-standing boss Peter Cowgill, the regulator has put the company on the back foot over fixing the price of sales of Rangers FC replica kit.
“The size of the provision to cover any resulting liabilities is modest but, nonetheless, this is an unwelcome distraction as the business looks to reset in the wake of Cowgill’s exit.”
Shares in JD eased 1% to 121.75p.