Chris Nicholls

SYDNEY: JB Hi-Fi has produced a court-enforceable undertaking in response to an Australian Competition and Consumer Commission (ACCC) investigation into anti-competitive behaviour prior to opening its Ballarat store.

The undertaking came after the ACC investigated JB Hi-Fi’s conduct in dealing with (I Can’t Get No) Satisfaction Pty Ltd, a retailer of music in Ballarat. Pior to mid 2007, JB Hi-Fi approached the shop 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, where Satisfaction was required 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 said they were concerned that by 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 said they were concerned the agreement may have been an exclusionary provision within the meaning of section 4D (exclusionary provisions) of the Act.

As a result of the investigation, JB Hi-Fi has had to produce a court-enforceable undertaking that limits the chain from entering into any contract, arrangement or understanding with a competitor to ensure they will cease trading.

The undertaking follows JB Hi-Fi’s previous court-enforceable undertaking, filed on 5 December 2006, that stated the company would implement a trade practices law compliance program designed to minimise any future risk of contraventions.

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," said ACCC chairman, Graeme Samuel. "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."

JB Hi-Fi were contacted for comment but did not respond prior to publication