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Law360 (December 2, 2020, 3:19 PM EST) -- The U.K.'s antitrust enforcer said it would appeal the Competition Appeal Tribunal's ruling ordering it to review its decision to unravel JD Sports' completed £90 million ($112 million) merger with a rival athletic fashion retailer on Tuesday, claiming that the tribunal "misapplied the law" in its ruling.
While the tribunal said the Competition and Markets Authority should have asked for more information on the impact of the COVID-19 pandemic on JD Sports and Footasylum, the CMA claimed the retailers were "not in a position to provide robust evidence on the medium to long term impact of coronavirus" during the final stages of its investigation — which it claims occurred shortly after the U.K. first entered lockdown.
According to the authority's statement, "reliable conclusions" about the impact of the coronavirus on the retailers could not be drawn since the proper information was not available. The CMA said it now awaits the tribunal's decision to grant or deny its appeal.
The CAT did support the analysis of the evidence in the CMA's May decision that found its recent purchase of Footasylum has hurt competition and should be unwound, but claimed last month that the authority did not go far enough in assessing the effects of COVID-19 on Footasylum and its suppliers.
"We consider that the assessment of these effects is sufficiently material to the CMA's overall conclusions as to require further examination of the [final report] as a whole and we therefore remit the case to the CMA for reconsideration in the light of this judgment," the tribunal's decision read.
The tribunal also claimed that the CMA had "acted irrationally" by concluding the pandemic would not have a substantial effect without having the necessary evidence, and its decision to not seek out more information prevented it from "having a sufficient basis for making the assessments and reaching the decisions it did."
In its May decision, the CMA said unwinding the JD Sports-Footasylum merger was the only way to preserve competition in the U.K.'s sports fashion sector, despite the companies' claims that they were not exactly rivals before the merger. The authority concluded that two-thirds of Footasylum customers who shop in-store would switch to JD Sports if the Footasylum chain was no more, and said both retailers share the same market of "younger, trend-conscious consumers."
JD Sports appealed the decision, asserting that the CMA failed to see how other retailers and suppliers influenced the country's sports fashion sector. While the tribunal said it found "no basis" to conclude the CMA erred in how it conducted its assessment of the competitive effects of the merger, it said the authority ought to have followed up with suppliers and Footasylum's primary lender about the impact of the pandemic.
JD Sports is represented by Brian Kennelly QC of Blackstone Chambers and Alistair Lindsay of Monckton Chambers, instructed by Linklaters LLP and Freshfields Bruckhaus Deringer LLP.
The CMA is represented by Marie Demetriou QC of Brick Court Chambers and Ben Lask of Monckton Chambers.
The case is JD Sports Fashion plc v. Competition and Markets Authority, case number 1354/4/12/20, in the Competition Appeal Tribunal.
--Additional reporting by Matthew Perlman, Nadia Dreid, and Anne Cullen. Editing by Amy Rowe.
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