JB Hi-Fi to open more stores despite ACCC problems in Ballarat

This comes after the ACCC raised concerns about arrangements between JB Hi-Fi and a small reseller in Ballarat. The high-profile company approached music reseller ‘(I Can't Get No) Satisfaction Pty Ltd’, early last year and attempted to buy the small business. Both parties agreed on a sale price with JB Hi-Fi intending to trade from Satisfaction's premises.

After deciding Satisfaction's premises was too small, JB Hi-Fi entered into a restriction agreement with the company. 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. Immediately after Satisfaction closed its store, JB Hi-Fi opened its new Ballarat store.

The ACCC was concerned that by requiring Satisfaction to stop trading, JB Hi-Fi may have contravened section 45 of the Trade Practices Act 1974. This act prohibits making of contracts, arrangements or understandings that restrict dealings or affect competition.

According to ACCC chairman, Graeme Samuel, 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.

"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," 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."

The announcement comes off the back of JB Hi-Fi's decision to upgrade its expected number of JB Hi-Fi branded stores from the previous guidance of 120 stores in Australia and New Zealand to 150 stores.

JB Hi-Fi CEO Richard Uechtritz said the comapany had 85 JB Hi-Fi branded stores in operation as of 31st December 2007. The 150 stores are expected to be of a similar size and sales volume as the existing JB Hi-Fi branded stores.

However, the company also believes there are further opportunities to open smaller format stores with similar product categories in smaller consumer catchment areas. The company will increase its focus on these opportunities as it draws closer to the 150 store target.

“The addition of new stores into established cities such as Melbourne, combined with our successful expansion into smaller shopping centres and regional centres such as Ballarat and Townsville, has materially extended the universe of property opportunities in Australia and New Zealand,” said CEO Richard Uechtritz. “This is similar to the experience of a number of our competitors including Harvey Norman” he said.

Uechrtritz said the mass merchant retailer has a strong retail model, which has been strengthened by the recent addition of games, computers and telecommunications. 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” said CEO Richard Uechtritz.

“The improved performance of the Clive Anthonys chain combined with its successful expansion into NSW provides another leg to the company’s growth” he said.

The company expects to have 13 to 15 new store opportunities each year for the next four to five years.

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