OFT Interest

From The Guardian, Friday:

The Serious Fraud Office is investigating suspected criminal price fixing and fraud at Britain's two largest sports retailers - JJB and Sports Direct.

The investigation follows a referral from the Office of Fair Trading, which has been secretly looking into the businesses since January.

JJB this morning told shareholders that it had sparked the probe with an approach to the OFT just 10 days after the company suspended its former chief executive Chris Ronnie. It claims to have negotiated immunity in exchange for whistle-blowing co-operation.

In a statement the OFT said it had earlier today "executed entry warrants at two addresses as part of an investigation into anti-competitive conduct in the sports goods retail sector".

Football shirt retailers have fallen foul of the OFT previously. They were fined millions for price fixing after Sports Direct boss Mike Ashley, the owner of Newcastle United FC, pointed the finger at his rivals.

The latest round of allegations could potentially generate much more serious penalties, including jail sentences, as price fixing has now become a criminal offence under the Enterprise Act of 2002. An SFO spokesman confirmed it is investigating the activities of both Sports Direct and JJB. He said the investigation was into suspected offences under the Fraud Act and the Enterprise Act.

The JJB statement today said that the OFT is focusing on the period when Ronnie - a former lieutenant of Ashley - ran the Wigan-based business. Ronnie moved into the JJB boardroom after buying a 29% stake in the business backed by Icelandic investor Exista. He borrowed the money to buy the stake from Kaupthing, the Icelandic bank which collapsed last year.

Sales and profits collapsed and JJB was nearly floored when two smaller retail chains - Qube and Original Shoe - that Ronnie bought for JJB from Ashley started to haemorrhage cash.

Ronnie was suspended by chairman Sir David Jones when it emerged that his shares had been seized by Kaupthing's liquidators.

A bitter feud has since broken out between Ronnie and Ashley on one side and Jones on the other. Part of the feud has centred on a £1.5m loan that Ronnie arranged for a Jones family business, with the cash coming from Ashley.

Shares in JJB fell 10% to 34.5p and Sports Direct lost 5% to 123p. Guardian article is online here