Sports Direct in SFO investigation

The sports firm owned by entrepreneur Mike Ashley has been targeted as a result of information from rival JJB Sports. Sports Direct, the struggling sports firm owned by Newcastle United owner Mike Ashley, has been visited by investigators from the Serious Fraud Office.

The firm's Mansfield head office was targeted after the Office of Fair Trading received a tip-off by rival JJB Sports at the beginning of the year.

Sports Direct denied anti-competition activities, saying "Sports Direct's philosophy is to promote competition in the sports and leisure market and its record demonstrates this."

It is believed that the investigation is looking at the supply of tennis and squash balls, with suspicions of sports companies acting as a cartel.

There were said to be frequent meetings between Ashley and ex-JJB chief executive Chris Ronnie and both were previously investigated over price-fixing in replica football shirts.

That enquiry was prompted by Ashley turning whistle-blower and resulted in record industry fines. This time, as JJB tipped off the authorities, it is guaranteed immunity in the investigation.

Shares in Sports Direct collapsed 17 per cent after news of the investigation emerged yesterday, heaping more problems on the troubled retailer.

It has £400m of debt and has been badly affected by the recession. On top of that Ashley is trying to offload Newcastle United after its relegation from the Premier League last season.

WHAT THEY ARE SAYING
Andrew Hill, FT: "Some benefits of World Cup qualification were taken as read by the market. Analysts had upgraded Sports Direct already. Still, to investors, the double-digit share price declines prompted by yesterday's news of a Serious Fraud Office investigation at the two companies must have felt like being handed the trophy only to be told they had to play another 90 minutes of extra time."

City trader, the Independent: "JJB is probably going to be OK throughout this investigation. The company seems to have been as helpful to the investigation as possible, and companies usually get credit for that. We reckon the stock has been oversold, probably to the tune of about 10 per cent." ·