The Australian Competition and Consumer Commission (ACCC) has started legal proceedings in the Federal Court against Cabcharge over claims it has abused its market power.
In its Statement of Claim filed with the Federal Court, the ACCC alleges Cabcharge has breached section 45 and 46 of the Trade Practices Act 1974 (Cth). These sections prohibit corporations from using their substantial degree of market power to engage in conduct for certain anti-competitive purposes.
Claims
Cabcharge services the Australian taxi industry through the provision of payment products, services, taxi-meters and networking. It is specifically known for its non-cash fare payments, which are used in between 80% to 90% of all taxis across Australia.
In relation to section 46, ACCC claims that Cabcharge:
- Used its leading position in the industry to refuse to enter into agreements which would allow alternative electronic systems for the processing of non-cash payment methods for taxi fares.
- Supplied approximately 5600 taxi meters at $150 below cost price and never obtained payment for 758 of those.
- Provided meter updates (worth over $18,000 per year) free of charge.
- Charges a 10% service fee for use of Cabcharge Instruments, despite customers having little choice in using any other payment method.
The ACCC's claims are directed at conduct where it says that Cabcharge, having market power in at least one or more markets, has used that power to eliminate, or at the least deter, competitive threats to Cabcharge's position.
At the heart of its case, the ACCC alleges that competitors needed, and asked for, access to part of Cabcharge's network on commercial terms but Cabcharge refused to deal with those competitors.
In support of these claims, the ACCC's Statement of Claim outlines seven particular instances where Cabcharge refused to deal with corporations which were looking to use their own electronic processing for Cabcharge Instruments.
Additionally, the ACCC claims Cabcharge breached section 45 of the Act by entering into an arrangement with Townsville Taxis to acquire their charge business and terminals. This argument revolves around the claim that Cabcharge did so to establish itself as the dominant supplier of Electronic Processing Services in Queensland, and consequently substantially lessen competition.
Cabcharge's Response
Cabcharge denies misuse of market power and all of the ACCC's claims. However, it does admit that it charges a 10% service fee for payment transactions but states that this is not retained as profit.
Little has been said in the public domain, however Cabcharge's 2009 Financial Statements include the following comment:
Lessons
As a general rule, it is usually not unlawful for a business to refuse to deal with a competitor. However, if a business possesses substantial market power (or if it thinks it might), it needs to carefully consider the trade practices consequences of doing so before it acts, and to ensure that the refusal does not constitute it taking advantage of its market power for an anti-competitive purpose.
The Cabcharge case may be an important development in section 46 case law concerning refusal to deal conduct. The ACCC is seeking penalty orders against Cabcharge. The ACCC also seeks an order from the Court compelling Cabcharge to set up a Trade Practices Compliance and Education/Training Program for its employees.
A pre-hearing trial was held on 25 September 2009, with proceedings continuing in the Federal Court. We will continue to keep you updated with any significant developments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
