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JD Sports sets aside £2m as it admits ‘cartel activity’

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07/06/2022
The Competition and Markets Authority has provisionally found illegal price-fixing of Rangers merchandise between the club, JD Sports and Elite Sports.

JD Sports and Elite Sports Group have confessed to “cartel activity” and have asked for leniency as part of the watchdog’s initial findings of its investigation into allegations of price-fixing.

The CMA claims Rangers Football Club, Elite Sports – the manufacturer of Rangers-branded clothing and products at the time – and JD Sports, broke competition law by “fixing the retail prices of certain Rangers-branded clothing products”.

Its preliminary findings suggest Elite Sports and JD Sports fixed the retail prices of a number of Rangers-branded replica kits and other clothing products from September 2018 until at least July 2019.

Further, the CMA also claims Rangers FC took part in the alleged collusion but only to the extent of fixing the retail price of adult home short-sleeved replica shirts from September 2018 to at least mid-November 2018.

It added that “all three parties allegedly colluded to stop JD Sports undercutting the retail price of the shirt on Elite’s Gers online store”.

The CMA suggested that Rangers FC became concerned 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’.

As such, the CMA claims there was an understanding between the three parties that JD Sports would increase the cost of the Rangers’ adult short-sleeved home replica shirt from £55 to £60 to bring it in line with the prices being charged by Elite and Gers Online.

Separately, the CMA said it was also concerned that Elite and JD Sports (without involvement from Rangers) “colluded to fix the retail prices of Rangers-branded clothing, including training wear and replica kit, over a longer period”.

“This included aligning the level and timing of discounts towards the end of the football season in 2019, to avoid the competition between them and protect their profit margins at the expense of fans”, the CMA said.

‘Pocket money at the expense of fans’

Michael Grenfell, executive director of enforcement at the CMA, 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 two retailers could pocket more money for themselves at the expense of fans.”

While these are provisional findings and a Statement of Objections (notice of a proposed infringement decision under the Competition Act 1998) has been issued to the parties, they can now make representations to the CMA before it reaches a final decision.

The CMA said provided JD Sports and Elite continue to co-operate with the investigation, each will receive a reduction on any financial penalties the CMA may decide to impose. 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.

JD Sports has admitted to cartel activity and has been issued with a draft penalty notice.

JD Sports said: “The CMA’s findings are, at this stage, only provisional and the Group will now review them with its advisers. The CMA will consider any representations that are made before issuing its final findings. As the CMA has noted, JD has co-operated fully with the CMA and, provided this continues, JD will receive a reduction on any financial penalties that the CMA may decide to impose.

“Based on the information available to it at this time, the Group intends to recognise a provision of approximately £2m in its financial statements for the 52 weeks to 29 January 2022 representing the Group’s best estimate of the liability payable in respect of this matter, including associated legal costs. The Group expects to release its final results for this period, incorporating this provision, shortly.”

A statement from Rangers FC, read: “The Statement of Objections represents the CMA’s provisional view only. It is not a finding that Rangers has broken the law and does not mean that the CMA will issue a final decision or impose a fine on Rangers.

“Rangers is committed to operating its business in full compliance with all laws, including competition law, and treats this matter very seriously. As such, Rangers will review in detail the CMA’s preliminary findings and will be submitting its response to the CMA in due course. Rangers notes that it has co-operated with the CMA since the investigation was initiated and will continue to do so.”

YourMoney.com has contacted Elite for comment but no response had been received at the time of publication.

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