The Australian Competition and Consumer Commission will not intervene in the acquisition of Blockbuster Australia Pty Ltd by Video Ezy Australasia Pty Ltd, after accepting court enforceable undertakings from Video Ezy, ACCC Chairman, Mr Graeme Samuel, said today.
Video Ezy and Blockbuster are owners and franchisors of Australian stores that primarily rent and retail DVDs and games to consumers. A vast majority of Video Ezy and Blockbuster stores are independently operated by franchisees.
Under the proposed acquisition, Video Ezy will acquire all of the shares in Blockbuster. It will enter into a master franchise agreement with Blockbuster Inc (the global headquarters of Blockbuster is listed on the New York Stock Exchange) for an initial period of 10 years with the possibility of renewal for a further 10 years. Post-acquisition, Video Ezy will operate the Blockbuster brand of stores separately from the Video Ezy stores.
In its Statement of Issues released on 9 May 2007 the ACCC expressed concerns about the proposed acquisition. In particular, the ACCC noted its concern that the merged entity may have an increased ability to secure exclusive deals and rental windows with suppliers with respect to non-box office hit new release DVD titles. The ACCC considered that this may have a detrimental impact on the competitive viability of other rental businesses.
The ACCC also considered the matter of coordinated conduct between the Video Ezy and Blockbuster networks. This included concerns that, post acquisition, franchisees of both networks may be under the false impression that they are able to coordinate prices (or services) between their businesses.
The undertaking places restrictions on Video Ezy purchasing new release DVD titles on an exclusive basis in the rental or retail markets for the next five years. Video Ezy has also undertaken to implement a comprehensive compliance program for its staff and franchisees to increase awareness of the Trade Practices Act.
The undertaking adequately addresses concerns over Video Ezy's ability to use any upstream buying power gained as a consequence of the acquisition to the detriment of competition in the rental market. The undertaking also lessens concerns relating to potential coordinated conduct post acquisition.
"On the information provided, the ACCC is satisfied that the proposed acquisition, subject to the court enforceable undertaking, would be unlikely to substantially lessen competition in the relevant markets," Mr Samuel said.
The undertakings will be available on the ACCC's website. A Public Competition Assessment will be issued on the ACCC's website in due course.