The Lex Newsletter: why football fans lose their shirts buying shirts

Dear reader,

Until the late 1980s, replica football strips were mostly worn by children. The shiny shirts are now a ubiquitous way for supporters to signal loyalty to their team. Fans have long complained of being ripped off. Some supporters must feel vindicated by this week’s provisional ruling from the UK competition watchdog against retailer JD Sports, rival Elite Sports and Rangers FC.

The trade in replica kits illustrates just how lucrative the loyalty of diehard fans can be for the UK’s powerful soccer businesses. A Premier League shirt costs £60 to £70, and a club typically produces three different shirts each season, the designs of which change every year.

Replica kit prices also raise ticklish issues over competition and co-operation in branded goods sales. The Competition and Markets Authority alleged that JD Sports, Britain’s biggest sportswear retailer, Elite Sports and, to some extent, Rangers, colluded to keep prices high for a period from September 2018. It claimed the two retailers aimed to pocket more money for themselves at the expense of fans of the Glasgow-based football club.

The ruling is not yet final. But JD Sports, whose longtime boss Peter Cowgill left the company last month amid tensions over governance issues, made a £2mn provision to cover penalties and legal costs.

The CMA has only disclosed the bare bones of the case. Rangers was allegedly irked by JD Sports selling the Rangers replica top at a lower price than Elite, which was seen at the time as the club’s “retail partner”. That led to an understanding between the three parties that JD Sports would increase the price of the shirt by £5 to £60, bringing it in line with Elite.

This is not the first clash between clubs and competition authorities. A previous tussle two decades ago is revealing, though the facts of the case were very different. In 2003, the Office of Fair Trading, a CMA predecessor, imposed fines of more than £18.6mn on the now-defunct JJB Sports, then the largest sports retailer in Britain, Manchester United FC, sportswear manufacturer Umbro and others.

Power imbalances featured heavily in that case. JJB accounted for a big proportion of Umbro’s business. The latter could have been in trouble if JJB had withdrawn some of its custom. Umbro, for its part, had leverage over Sports Soccer, run by unorthodox retail magnate Mike Ashley. That business, which morphed into Sports Direct and later Frasers Group, would have suffered if Umbro had held back some of its allocation of “must-have” England and Manchester United replica shirts.

That set the scene for Umbro to assuage JJB’s concerns about being undercut by persuading Sports Soccer to stop discounting its shirts. The manufacturer shared information about the future pricing intentions between the rival retailers.

From a legal perspective, the case showed there could be an agreement between competing suppliers, even though they had no direct discussions. In its unsuccessful appeal, JJB argued the ruling created commercial uncertainty because it cast doubt on manufacturers’ freedom to discuss prices and margins with their principal customers.

The case also indirectly made legal history as the precursor to a class action-style claim, the first of its kind in the UK. Which?, the consumer organisation, sought compensation on behalf of hundreds of fans who had bought shirts. It was settled in 2008 with JJB agreeing to pay £20 a shirt, with the total cost coming to less than a top player’s weekly wages. This unspectacular outcome did nothing to overcome scepticism about class actions in Britain.

The case was also notable for the personalities and rivalries involved. Ashley was the whistleblower who complained to the OFT in 2000 about replica kit price-fixing, reportedly as revenge for being shut out of the Manchester sportswear oligopoly. Dave Whelan, JJB’s founder, was alleged to have told him: “There is a club in the north, son, and you’re not part of it.”

The replica kit market is not just riven by commercial rivalries. Those on the pitch are critical too. The more successful a club, the more sportswear manufacturers can rely on global demand from fans to justify their outlay on a kit contract.

Notably, sportswear giant Adidas signed a £750mn deal in 2014 to make Manchester United’s kit for 10 years, saying it expected total sales to reach £1.5bn during the partnership. But it included a penalty clause that meant the club would be paid less if the team failed to reach Europe’s top competition for two consecutive seasons.

Liverpool has overtaken Manchester United, making more shirt sales — 2.45mn last year — than any UK club, though it ranks behind Bayern Munich and Real Madrid, according to Statista.

Liverpool signed a £70mn-a-year shirt deal with Nike in 2019. In a sign of expectations of a highly profitable relationship, the previous contract holder New Balance unsuccessfully mounted a legal challenge.

Last month’s defeat by Real Madrid in Paris dashed Liverpool’s hopes of claiming the Champions League trophy for a seventh time. Nonetheless, the club’s impressive record under manager Jürgen Klopp is reflected in its growing commercial clout. The price of its replica kit will doubtless register that.

Enjoy the rest of the week,

Vanessa Houlder
Lex writer