Maybe too close for comfort.
The Australia Competition and Consumer Commission (ACCC) chairman, Rod Sims has indicated that there may be an issue of competitive balance if the number of major players in the Australian consumer electronics industry was reduced from three to two.
This follows the disclosure last week that JB Hi Fi was in early exploratory talks to buy The Good Guys (TGG).
Describing JB Hi-Fi and The Good Guys as “quite close competitors’’ in terms of product range and store locations, Sims has told The Australian over the weekend that when four players in a sector became three it was a problem — but when three became two, the problem escalated.
“Clearly, if it (JB Hi-Fi’s acquisition of The Good Guys) came our way we would have a close look at it, these are two quite close competitors,” Sims (pictured) said.
“We always understand of course the best acquisition you can make is of your closest competitor because you not only gain the synergy, but also reduce competition and get some increased price gains and that is of course why we are here.’’
However, Sims in-tray grew heavier by last Friday when Harvey Norman chairman, Gerry Harvey said he also wanted to buy TGG and was willing to offer $900 million.
IBISWorld estimates The Good Guys has a 12.5% slice of the domestic appliance market, while JB Hi-Fi has 13.9% and Harvey Norman is the biggest player with 15.3%.
“It is clearly a market that has consolidated recently, you have had Clive Peeters and Dick Smith disappearing, and I think given the store locations you would have to say there are reasonably high barriers to entry,’’ Sims said.
“On the other hand, one would have to assess online (retail) — what influence that is having. We would have to have a fairly close look at it.”
Sims told the newspaper that he generally had concerns when the number of large competitors in a sector was reduced to two.