UPDATE 3-Sports Direct faces competition probe on JJB buys

* Competition Commission to probe purchase of 31 JJB stores

* Probe called after Sports Direct failed to sell 5 outlets

* JJB says probe will not affect it

* Sports Direct shares fall 4 pct, JJB down 1 pct

(Adds comment from JJB spokesman, updates shares)

LONDON, Aug 7 (Reuters) - Sports Direct (SPD.L), Britain's biggest sporting goods retailer, faces an investigation by regulators into its purchase of 31 stores from rival JJB Sports (JJB.L) after failing to find a buyer for five of the shops.

Shares in Sports Direct, which is controlled by Mike Ashley, the billionaire owner of Newcastle United soccer club, fell 4 percent on Friday trade on concerns it might be forced to keep the five shops empty while still paying rent.

Britain's consumer affairs watchdog, the Office of Fair Trading (OFT), had called on Sports Direct to sell the five stores because of concerns that competition would be restricted in their localities.

The OFT said on Friday that Sports Direct had not managed to find a buyer and had made no significant progress towards a deal.

As a result, it had referred Sports Direct's purchase of all 31 JJB stores, which were carried out over a two-year period, for further investigation by the Competition Commission.

"Although the exact details of the stores under the spotlight is unclear, we believe it unlikely that the annual liability to Sports Direct from unmitigated occupancy costs would exceed 1.5 million pounds ($2.5 million)," Singer analyst Matthew McEachran said in a research note.

"Nonetheless, this news could weigh on the shares which have performed well over the last quarter (up 32 percent)."

At 1116 GMT, Sports Direct shares were down 3.5 pence at 87.2 pence, valuing the business at about 507 million pounds. JJB shares were down 1 percent to 25.5 pence, valuing it at about 64 million pounds.

Singer's McEachran said there was also the possibility of more drastic action from the Competition Commission that could affect all 31 stores.

JJB, which is downsizing after nearly falling into administration earlier this year, was adamant the investigation will not affect it.

"In the case of all 31 stores the Competition Commission will not be able to force JJB to re-acquire any of the stores. That's just not an option," said a spokesman for the firm.

Sports Direct, which owns Sports World and Lillywhites stores as well as brands such as Slazenger, Lonsdale and Dunlop, declined to comment.

Last month it emerged that Ashley had made a 1.5 million pound loan to JJB's executive chairman David Jones to help him fund a technology firm.

Jones paid the loan back but the issue raised concerns he faced a conflict of interest and led to a war of words between the two companies. ($1=.5966 Pound) (Reporting by Mark Potter; additional reporting by James Davey, editing by John Stonestreet and Rupert Winchester)