Shares in JJB Sports fell by 21 per cent today after the Office of Fair Trading (OFT) said it was investigating whether Sports Direct’s acquisition of nearly 5 per cent in the retailer was anti-competitive.

Sports Direct, founded by billionaire Mike Ashley, who also owns Newcastle Football Club, recently bought a 4.7 per cent stake in JJB and four of its most profitable stores for £3.4 million. It adds to a 16 per cent stake Sports Direct already owns in JJB through contracts for difference.

The OFT said today that it was investigating whether a combination of Sports Direct and JJB might have an anti-competitive impact on the sports clothing sector.

Although the two companies remain separate, the OFT is investigating whether Sports Direct’s acquisition of the 4.6 per cent stake in JJB creates what it calls "a relevant merger situation” — and will examine the market as if the two businesses were trying to merge.

JJB, Sports Direct and any other interested parties have until December 16 to petition the OFT, after which it will decide whether to refer the case to the Competition Commission, which could order Mr Ashley's company to reduce its stake.

Earlier this year, the Competition Commission told BSkyB, in which News Corporation, parent company of The Times, has a 39.1 per cent stake, to sell some of its holding in rival broadcaster, ITV.

JJB shares fell a further 3p to 12p today, adding to yesterday's 32 per cent decline on fears the struggling sportswear group may breach its banking covenants.

The OFT investigation may be complicated by Sports Direct’s contracts for difference holdings and a network of other ties between the companies.

Mr Ashley also owns shares in JD Sports, another sportswear retailer, which last week bought a 10.2 per cent stake in JJB, stoking speculation that it was preparing a takeover bid.

Last week The Times reported that JD’s management had requested through its advisers a meeting with the JJB board.

JJB is in separate talks to sell its 50-site gym chain to Dave Whelan, the owner of Wigan Athletic and the company’s founder, for about £100 million.

JJB is seeking the proceeds to reduce debt and satisfy its lenders, HBOS and Barclays, which appointed a restructuring team from KPMG, the accountancy firm, to carry out a financial review.

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