ASX-listed retailer, JB Hi-Fi, has agreed not to enter into negotiations with competitors that force them to stop trading in areas where it plans to launch stores.
About mid-2007, JB Hi-Fi approached music retailer, (I Can't Get No) Satisfaction, to purchase the business. Both companies reached an agreement on a sale price, with JB Hi-Fi intending to trade at Satisfaction's premises in Ballarat, Victoria.
However, JB Hi-Fi decided the premises was too small and both companies executed a restriction agreement which required Satisfaction to close its doors by a certain date. Satisfaction was also prevented from renting out the premises to another type of CD/DVD or gaming retailer. A day after Satisfaction's store closure, JB Hi-Fi launched its Ballarat outlet.
The decision raised concerns at the Australian Competition and Consumer Commission (ACCC) which claimed JB Hi-Fi may have contravened section 45 of the Trade Practices Act 1974 by requiring Satisfaction to stop trading. The Act prohibits the making of contracts, arrangements or undertakings that restrict dealings or affect competition.
Under the new court-enforceable undertaking, the retailer has agreed that it will not, for three years, enter into any contract, arrangement or understanding with any person with whom it is 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," ACCC Chairman, Graeme Samuel, said in a statement. "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."
Despite the court proceeding, the retailer has announced it plans to rollout an additional 65 stores nationally, bringing its total shopfronts to 150.
In February, JB Hi-Fi opened up a dedicated IT and computer store in Melbourne and is also planning to open a second store in Sydney.