Leading consumer electronic retailer JB Hi Fi is in strife with the Australian Competition and Consumer Commission after allegations of restrictive practises trade practices in Victoria.
Leading consumer electronic retailer JB Hi Fi is in strife with the Australian Competition and Consumer Commission after allegations of restrivive trade practices in Victoria.
The Australian Competition and Consumer Commission claim that they have accepted a court-enforceable undertaking from JB Hi Fi Limited after concerns about the arrangements it made with a small retailer in Ballarat to close its store. Before mid 2007 JB Hi Fi approached (I Can’t Get No) Satisfaction Pty Ltd, a retailer of music in Ballarat, to buy its business. The parties agreed on a sale price with JB Hi Fi intending to trade from Satisfaction’s premises.
However, JB Hi Fi decided that Satisfaction’s premises were too small, so the parties executed a restriction agreement. This required Satisfaction to close its store by a specified date and arrange with its landlord not to re-let the premises to another retailer of CDs/DVDs or games for 12 months. The day after Satisfaction closed its store, JB Hi Fi opened its new Ballarat store.
The ACCC was concerned that by JB Hi Fi requiring Satisfaction to stop trading, JB Hi Fi may have contravened section 45 of the Trade Practices Act 1974, which prohibits making of contracts, arrangements or understandings that restrict dealings or affect competition. In particular, the ACCC was concerned that the agreement may have been an exclusionary provision within the meaning of section 4D (exclusionary provisions) of the Act.
JB Hi Fi has provided a court-enforceable undertaking under which it has agreed that it will not, for three years, enter into any contract, arrangement or understanding with any person with whom it is (or is likely to be) in competition to ensure the person will cease trading.
On 5 December 2006 JB Hi Fi provided a court-enforceable undertaking to the ACCC after concerns were raised by the ACCC under the consumer protection provisions of the Act. In that undertaking, JB Hi Fi agreed to establish and implement a trade practices law compliance program designed to minimise JB Hi Fi’s risk of future contraventions of the misleading and deception conduct provisions of the Act.
In its most recent undertaking, JB Hi Fi has undertaken to extend its compliance program to include the restrictive trade practices provisions of the Act.
“The present matter underlines the need for companies and their legal advisors to take care in how they structure their arrangements so that an otherwise legal transaction does not move into a possibly illegal one,” ACCC Chairman, Mr Graeme Samuel said. “A simple legal sale of business in this instance was varied into a form more akin to an agreement between competitors to cease competing in Ballarat.”
A copy of the undertaking given by JB Hi Fi will be available on the ACCC’s website, under Public Registers.
Yesterday it was announced that JB Hi-Fi is set to roll out 150 branded JB Hi Fi stores during the next 5 years. This is up from their previous target of 120.
The current plan according to Chief executive Richard Uechtritz will see 13 to 15 stores rolled out each year. The Company is also investing heavily in an online presence to deliver not only an opportunity for consumers to buy online but to identify whether an individual JB HiFi store has in stock a product a consumer wishes to buy.
“This information research shows, is more likely to drive a consumer to a bricks and mortar store than one without a “live” web site.
JB Hi-Fi said the 150 stores are expected to be of a similar size and sales volume as the existing stores.
The Company is also investigating the opening of smaller format stores with similar product categories in smaller consumer catchment areas.
Chief executive Richard Uechtritz said the addition of new stores in Melbourne combined with expansion in smaller centres such as Ballarat and Townsville had extended the property opportunities available to the company however he has warned that in rural Australia there is limited expansion.
“Several of our competitors are trying to get growth in rural location and we believe this will be one of the hardest hit if there is a downturn. We believe that we can also service this part of Australia online”
In an interview with Live News he said” “Close to half our stores are still to complete the three-year maturity ramp up and with so many new store opportunities we remain very excited about the growth opportunities over the coming years.”