The Competition and Markets Authority (CMA) started investigating JD's 86 million pound ($116.72 million) purchase of Footasylm in 2019 and ordered it to unwind the merger in May last year. JD successfully appealed that decision, with the regulator considering the impact of COVID-19 on shopping habits as it reassessed its findings.
However, the CMA said that the evidence it has analysed showed that the two companies are adapting well to market conditions and they would still thrive should the merger not go ahead.
"The pandemic may have altered the way we shop but innovative businesses, driven by healthy competition, will rise to the challenge and successfully cater to changing tastes and habits," CMA Chair of the inquiry group Kip Meek said in a statement on Thursday.
JD Sports, which sells brands such as Nike, Adidas and Puma in its physical and online stores, has argued the COVID-19 pandemic has only increased competition, as global brands expand their direct-to-consumer businesses.
JD Chairman Peter Cowgill said the regulator's decision on Thursday remains "inexplicable" to anyone who understood how the pandemic has affected UK retail.
"It is deeply troubling at a time when the UK high street has been seriously damaged already and is vulnerable to further closures," Cowgill added.
JD has six weeks to send to the CMA their promise to sell Footasylum, a process that the CMA will oversee, or the British regulator will put in place a legally enforceable order.
The retailer said it was studying the report in detail and would carefully consider its options. It has a four week window to appeal the decision if it wishes to do so.
($1 = 0.7368 pounds)
(Reporting by Aby Jose Koilparambil, Sachin Ravikumar and Yadarisa Shabong in Bengaluru; Editing by Ramakrishnan M., Kirsten Donovan)
By Yadarisa Shabong