The boss of Britain’s biggest trainers retailer faces questions over his conduct this weekend as the competition watchdog is revealed to have launched an investigation into a possible breach of its rules relating to the FTSE 100 giant’s takeover of smaller rival Footasylum.
The Sunday Times has seen video footage showing Peter Cowgill, JD Sports’ executive chairman, holding a meeting with his opposite number at Footasylum, Barry Bown, in a car park near Bury in Greater Manchester. They were filmed sitting in a black Mercedes at Bridge Hall industrial park, which is roughly equidistant between JD and Footasylum’s head offices, on the morning of July 5. In the video, they are initially joined by JD’s general counsel, Siobhan Mawdsley. She gets out of the car and walks off, leaving Cowgill and Bown talking in the front seats.
The Competition and Markets Authority has been examining JD’s £90 million takeover of Footasylum since it was announced in March 2019. The CMA’s initial enforcement order, implemented in May 2019 and still in place, bans the two sides from integrating Footasylum into JD or in any way hindering Footasylum from competing with the bigger company.
It does not forbid meetings but says that “no business secrets, know-how, commercially sensitive information, intellectual property or any other information of a confidential or proprietary nature” can be shared. Exceptions are “where strictly necessary in the ordinary course of business” — for example, if they need to comply with accounting obligations or requests from regulators.
Every two weeks, the bosses of Footasylum, JD and JD’s majority shareholder, Pentland Group, have to provide written assurances that they have not breached the order. Last year, the watchdog fined JD £300,000 over the closure of a Footasylum store in Wolverhampton, which the CMA said breached the order. It withdrew the fine after JD appealed. JD argued the store was closed “without JD’s knowledge or involvement”.
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The CMA is investigating the meeting at Bridge Hall. The inquiry is separate to last year’s penalty notice. The regulator said: “These rules are put in place to protect consumers and other businesses operating in that market as we investigate a merger. We take compliance very seriously and thoroughly investigate any potential breaches. Where there is clear evidence that a breach has occurred, we do not hesitate to take action.”
All parties vigorously deny wrongdoing. JD said: “The brief meeting between Peter Cowgill and Barry Bown on July 5 was arranged in order to discuss Barry’s future involvement in the Footasylum business, a personal issue in relation to a family member of Mr. Bown known to Mr Cowgill, and to reassure JD that Footasylum was doing everything it separately could to assist in obtaining CMA merger clearance. These are legitimate topics. The CMA is fully aware of this and other conversations having taken place.”
A source close to Cowgill said they had met in the car park because a nearby café was shut due to Covid and that no business secrets were discussed. Cowgill suggested the video had been taken on behalf of a “key competitor”. He said: “I’m not concerned by the footage in terms of any implications of business wrongdoing or incorrect conduct. But I am concerned — very — that a competitor is able to go to those lengths.”
The CMA ordered JD to sell Footasylum last week, after a two-and-a-half-year review. It said allowing JD, which has 405 UK stores, to take over Footasylum, which has 65, “could lead to a substantial reduction in competition”. JD has up to 30 per cent of the market for trainers, the CMA says, and gets access to top products from Nike and Adidas, such as Nike’s £250 Mercurial Superfly 8 Elite football boots for men and Adidas’s £120 Originals ZX 2K Boost 2.0 Trail trainers for women. Footasylum has 5 per cent of the market.
The CMA’s verdict provoked a furious response from Cowgill. He claimed the watchdog was “in a minority of one” in its conclusion, which was “inexplicable to anyone who understands what difference the pandemic has made to UK retail”. JD said it was considering its options. It could appeal, which would lead to an unprecedented fourth review of the deal by the CMA.
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The new inquiry into a possible breach of the CMA’s enforcement order will crank up pressure on Cowgill, 68, JD’s executive chairman since 2004. He is admired in the City and the retail industry, and JD has delivered a total return of more than 15,000 per cent during his tenure, according to broker AJ Bell. But there has been growing anxiety among some shareholders over governance at the company — and Cowgill’s role as chairman and chief executive. In May, JD’s annual report suggested it was preparing to separate the two roles, saying that “additional succession planning has occurred throughout the financial year following concerns relating to the single appointment of the executive chairman”. Cowgill appeared to contradict that in comments to The Times. He denied that he was planning to leave or hand over some responsibilities.
Footasylum was set up by JD’s founders in 2005 and is run by Bown, chief executive of JD between 2000 and 2014. JD swooped in 2019, buying an 8.3 per cent stake in Footasylum. It sealed a deal to buy out the rest at 82.5p per share the following month — a 77.4 per cent premium to the previous day’s price. The watchdog blocked the takeover in 2020. JD successfully challenged its judgment at the Competition Appeal Tribunal, which said the regulator had not gathered enough information. The CMA reconsidered and came down against the merger again last week.
King of trainers’ summit in a car park
The black Mercedes S450 parked on an industrial estate near Bury in Greater Manchester on a drizzly morning in July drew no attention from passers-by. But inside the car were three key figures from an industry whose products excite and obsess young people: trainers.
In the driver’s seat was Peter Cowgill, executive chairman of JD Sports Fashion, the £11.6 billion chain that has become Britain’s No 1 sportswear retailer thanks to its relationships with Nike and Adidas. In the passenger seat was Barry Bown, boss of JD’s smaller rival Footasylum. In the back was Siobhan Mawdsley, JD’s general counsel and company secretary. After a few minutes she got out and walked off, leaving the two men to talk.
This meeting came against a turbulent backdrop. For over two years, JD had been trying to justify its takeover of Footasylum, announced in March 2019 before running into strong objections from the merger watchdog. When it began looking at the deal, the Competition and Markets Authority (CMA) imposed strict conditions. The two sides are not allowed to integrate their businesses. Footasylum has to be run independently. “No business secrets, know-how, commercially sensitive information, intellectual property or any other information of a confidential or proprietary nature” can pass between the two, except where “strictly necessary”.
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Bridge Hall industrial park is just off the M66, five minutes’ drive from JD’s base near Bury and 15 minutes from Footasylum’s Rochdale HQ. The CMA has launched an investigation into a possible breach of its order. All parties vigorously deny any wrongdoing. A source close to Cowgill said they had met in the car park because a nearby café was shut due to Covid and no business secrets were discussed. The source added that suggestions of wrongdoing were a “red herring”. He said the video had been obtained through surveillance: “Think about the levels to which a competitor is prepared to stoop to damage JD.”
Last week, the watchdog said it would block JD’s deal and ordered the FTSE 100 giant to sell Footasylum, saying that otherwise customers would suffer “higher prices, fewer discounts and less choice of products”. The CMA will oversee the sale process and approve the purchaser. Its announcement provoked a furious response from JD. Cowgill said the CMA was in a “minority of one” in thinking the deal would hurt competition and described its decision as “inexplicable”. JD suggested it might appeal, saying it would “carefully consider its options”.
Athleisure fever
As the dominant brands, Nike and Adidas scrupulously control the supply of their best products. They engineer huge excess demand, delivering limited numbers of trainers to stores in “drops” that cause hundreds of “sneakerheads” to queue outside. The scarcity factor means there is immediate resale value: a typical pair of Yeezys, a collaboration between Kanye West, the US rapper, and Adidas, would retail for £180 and might resell for £300 shortly afterwards. Ann Hebert, Nike’s head of North America, resigned this year after it emerged her teenage son, Joe, spent hundreds of thousands of dollars’ a month on trainers using a credit card in her name for his resale business.
StockX, an online market, lists pairs of Nikes that have sold for $24,000 (£17,780) and more — some originally auctioned off in very small numbers or given out to family and friends of the company. A pair of Nike Air Ships worn by the Chicago Bulls basketball star Michael Jordan in 1984 sold for a record $1.5 million (£1.1 million) through Sotheby’s last month.
JD, which styles itself “the undisputed king of trainers”, has an unofficial motto: “If there’s one person running past the pub in trainers, there will be ten wearing them inside.” Under Cowgill, it spotted the athleisure trend early and made itself Nike and Adidas’s best friend on the high street, polishing its 405 UK stores to a high standard and winning supplies of the best trainers as the two power brands cut off shipments to weaker retailers. Cowgill, a gruff Lancastrian, has said JD negotiates with Nike and Adidas like other retailers and that “any brand has a selective distribution policy — that’s why Chanel don’t supply your local paper shop”.
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But JD’s access to sought-after products has stoked envy among rivals, including Mike Ashley of Sports Direct. In September 2019, after the CMA’s initial finding that JD’s Footasylum deal was likely to result in a “worse deal for customers”, Sports Direct put out an unusual statement. It said its lawyers had advised that the CMA inquiry was likely to “highlight the power of the ‘must-have’ brands and potential market-wide practice aimed at controlling the supply and, ultimately, the pricing of their products”.
The UK sportswear market is set to be worth £6.7 billion by 2023, according to the regulator. JD is the biggest trainers retailer, with a market share of up to 30 per cent. Sports Direct is second, also with up to 30 per cent, and Nike third. Footasylum has about 5 per cent. Shop sales have held up, but online sales are growing. Nike, Adidas and other brands are increasingly selling direct to shoppers via their websites and mobile apps.
Working like stink
Cowgill, 68, started out as an accountant at Cowgill Holloway, whose offices were above a barber’s in Bolton. Among his first clients were JD Sports co-founders John Wardle and David Makin, who opened their first shop in Bury in 1981. Cowgill, who has said he “worked like stink” at Cowgill Holloway, became an adviser to Wardle and Makin and joined JD as finance director in 1996. He resigned after a disagreement in 2001, returning as executive chairman in 2004.
In 2005 Stephen Rubin’s Pentland Group, which owns Speedo, Berghaus and Ellesse, bought Wardle and Makin’s remaining 45 per cent stake in JD for £45 million. Today, Pentland’s holding of 52 per cent is worth £6 billion. Cowgill has won plaudits for building JD into a global powerhouse with 3,000 stores and sales of £6.2 billion, taking over rivals such as DTLR and Finish Line in the US along the way. He is worth about £100 million. Yet he has come under pressure over JD’s alleged corporate behaviour in the past few years — and not just relating to Footasylum.
Last December, the CMA opened an inquiry into JD and others over suspected price-fixing of Rangers football shirts. The watchdog followed that this year by launching an inquiry into JD and Leicester City over suspected breaches of competition law. JD is unable to comment on those cases, which are live. Cowgill also raised eyebrows with a bizarre putative bid for the collapsed department store Debenhams last year. JD dropped the move after its share price slipped on the news.
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There is a history of competition abuse in the sportswear sector. Ashley, 57, blew the whistle on a plot to fix the price of Manchester United shirts in 2000 after Dave Whelan, founder of Wigan-based JJB Sports, told him: “There’s a club in the north, son, and you’re not part of it.”
Footasylum, which has 65 stores, was set up by Wardle and Makin after they sold out of JD in 2005. Its chief executive, Clare Nesbitt, is Makin’s daughter. Bown, its executive chairman, worked as Cowgill’s right-hand man at JD for 14 years until 2000. JD swooped on Footasylum for £90 million in April 2019, after it made a string of profit warnings.
Despite the close ties between the two companies, Cowgill has been outspoken about the CMA’s intervention, telling The Times in February last year that its approach was “appalling, unjust and inaccurate”. Whether he keeps up his vocal opposition remains to be seen.
Shy tycoons behind JD’s rise
The financial backers of Peter Cowgill, who has a taste for Bacardi and Coke and says his hobbies are “blondes and Barbados”, are cut from a very different cloth.
The publicity-shy Rubin family are worth about £6.4 billion and are consistently ranked among the UK’s biggest taxpayers. Through their Pentland Group, they own brands such as Berghaus and Speedo, as well as 52 per cent of JD Sports.
Pentland is chaired by Stephen Rubin, 83, whose parents founded the Liverpool Shoe Company with £100 in 1932. His son, Andy, 56, is the deputy chairman.
