Ashley’s firm investigated by trade watchdog

Dec 4 2008 by Peter McCusker, The Journal

THE competition watchdog is investigating Newcastle United owner Mike Ashley’s firm Sports Direct’s purchase of a stake in rival JJB Sports.

The Office of Fair Trading says it is “asking for comments relating to potential competition concerns”.

In late October this year, Ashley’s sportswear company bought a further £3.4m in shares in rival JJB Sports, taking his stake to 22%. This fuelled speculation Sports Direct will make a bid for the whole company.

The OFT is empowered to act in situations like this if it fears an increased stake means one company may have a “material influence” on a smaller competitor.

The OFT has set a deadline for interested parties to comment of December 16.

It has been a turbulent year for Wigan-based sport company JJB Sports, which was founded by one of Ashley’s business adversaries David Whelan.

Following falling sales, it announced it was shutting 70 of its 400 stores and axing 800 jobs. Its shares have fallen from over 130p this time last year to 13p yesterday.

Sports Direct has a habit of buying into rival companies, also holding shares in a second rival sports retailer JD Sports.

An OFT statement said: “The OFT is considering whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002.

“Should it be found to be a relevant merger situation, the OFT will further consider whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services that warrants reference to the Competition Commission for investigation and report.”