Page last updated at 12:10 GMT, Thursday, 10 September 2009 13:10 UK

Sportwear chains face fraud probe

JJB Sports sign
JJB must now cooperate with the OFT to maintain immunity

The Serious Fraud Office (SFO) is investigating JJB Sports and Sports Direct International after a referral from the fair trading watchdog.

The move comes after JJB said it had blown the whistle on a suspected cartel in the sports retail market.

Officials from the OFT visited the Wigan offices of JJB Sports on Thursday.

Sports Direct International is controlled by Newcastle United owner Mike Ashley.

An SFO spokeswoman said: "The SFO can confirm it is investigating the activities of JJB Sports and Sports Direct International. The investigation is into suspected offences under the Fraud Act and the Enterprise Act."

Investigation

The SFO said it was investigating on that day that JJB said it had been to the OFT with regards to a suspected cartel.

JJB approached the OFT at the end of January, asking for leniency in return for full co-operation with the OFT in any investigation into a suspected cartel, and has worked with the watchdog since.

The case involves "suspected agreement or concerted practice to dampen competition in the sports retail market" during June 2007 to March 2009.

The investigation is centred on the period during which former chief executive Chris Ronnie was at the company.

JJB was granted a marker by the OFT in August, giving it full immunity from any financial penalties of up to 10% of turnover.

In return, it must co-operate fully with the OFT, withdraw from any further participation in the alleged cartel and pledge not to act in bad faith.

The company, which saw shares fall 10%, said it could be liable for third-party damages despite the wider immunity, although these would be low, and added that the investigation could take "a number of years".

The watchdog said: "The OFT will not be in a position to conclude whether it considers the law has been infringed until it has completed its investigation and assessed the available evidence."

Sacked

Mr Ronnie bought founder Dave Whelan's stake in JJB in 2007 with Icelandic investor Exista, but used the shares as security against the £190m loan from Icelandic bank Kaupthing for the deal.

He was sacked as chief executive in March, after it emerged his 27.5% stake in the business had been seized by administrators when the Icelandic bank collapsed.

In August it was revealed that Sports Direct's purchase of 31 stores from rival JJB was being investigated by the Competition Commission.

The OFT referred the deal to the commission after Sports Direct - which owns the Sports World and Lillywhites chains - failed to sell stores in five areas where there were competition concerns.

Sports Direct had been warned in May that it faced an inquiry if it failed to find buyers for the outlets.



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