Foot Locker and Dick’s Sporting Good stores.
Reuters
Sen. Elizabeth Warren is calling on the FTC and DOJ to consider blocking Dick’s Sporting Goods’ proposed acquisition of Foot Locker, writing in a letter to the agencies that the merger could cut jobs, raise prices and reduce competition.
The missive, sent Tuesday evening, asks the agencies to “closely scrutinize” the $2.4 billion merger and “block the deal” if they determine it violates antitrust laws. Warren, D-Mass., argues in the letter, which was seen by CNBC, that the tie-up could create a duopoly in sneakers and other athletic shoes between the combined companies and its next largest competitor, JD Sports.
“This is particularly concerning given that more than half of parents ‘plan to sacrifice necessities, such as groceries,’ because of rising prices for back-to-school shopping,” Warren wrote, citing a July survey from Credit Karma. “Higher prices on athletic footwear could lead to further economic hardship for parents.”
Warren said the risks of the merger are compounded by the rapidly consolidating athletic shoe store sector. Britain’s JD Sports has set its eyes on the U.S. as its biggest growth market and, since 2018, has been on a buying spree, snapping up smaller competitors like Finish Line, Shoe Palace, DTLR and Hibbett.
If Dick’s Sporting Goods’ acquisition of Foot Locker is approved, two companies – JD Sports and the combined entity – would own 5,000 athletic shoe stores in the U.S., which could squeeze smaller businesses, Warren said.
“Dick’s and Foot Locker currently compete with each other and with independent retailers to secure deals with suppliers. The new giant would have significantly increased power to extract favorable conditions with manufacturers,” she wrote. “This could mean that independent retailers are at a disadvantage when it comes to negotiating with suppliers, which could give Dick’s and Foot Locker an incentive to engage in anticompetitive conduct to restrict suppliers from dealing with independent retailers.”
Under President Joe Biden, the Federal Trade Commission took an aggressive approach to mergers and quashed a number of high-profile planned tie-ups, including Tapestry’s proposed acquisition of Capri and Kroger’s bid to acquire Albertson’s. When President Donald Trump took office in January, many on Wall Street expected that his administration would make it easier for larger mergers to be approved.
So far, his administration has approved at least one deal previously blocked by Biden – Nippon Steel’s acquisition of U.S. Steel – but it’s unclear how new leadership at the FTC and Department of Justice will view mergers in the retail industry, which can be felt more acutely by consumers.
Amanda Lewis, who spent close to a decade scrutinizing mergers at the FTC and is now a partner at Cuneo Gilbert and LaDuca, previously told CNBC the merger is unlikely to raise many concerns because combined, Dick’s and Foot Locker would represent around 15% of the sporting goods market.
“Usually below 30% doesn’t raise too many agency red flags,” said Lewis.
Lewis said she expects the merger to be approved and at most, Dick’s could be required to divest some of its stores to competitors to preserve competition in local markets. The number of stores it would potentially need to divest could be lower and perhaps more palatable under Trump’s FTC than Biden’s, said Lewis.
The DOJ and FTC didn’t return requests for comment.
