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.
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
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
Charges a 10% service fee for use of Cabcharge Instruments,
despite customers having little choice in using any other payment
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
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 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
As the ACCC has not provided any
evidence in support of their claims against Cabcharge our legal
advisors are unable to determine the likelihood, if any, of any
adverse findings against Cabcharge.
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
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.
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In some cases these fees or surcharges are higher than what a bank charges to these merchants for use of the system.
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