Cabcharge accused over market power

The Australian Competition and Consumer Commission launched a lawsuit against Cabcharge Australia yesterday, alleging misuse of market power and entering agreements for the purpose of reducing competition.

If the court upholds the alleged breaches of sections 45 and 46 of the Trade Practices Act, Cabcharge could face a penalty of $10 million for each contravention. It could also be liable under changes to the law that came into effect in January 2007 to pay a penalty of 10 per cent of its turnover per contravention.

Cabcharge's revenue in 2008 was $173 million.

The statement of claim filed yesterday contains 10 allegations of breach, but the overlap between them makes it difficult to predict the total potential penalty the company is facing.

Cabcharge spokeswoman Tracey Cain said yesterday the company had received no paperwork in relation to the suit "therefore I can't comment any further other than to say that Cabcharge always behaves appropriately".

Cabcharge issued a statement to the Australian Securities Exchange at 3.14pm, also saying no papers had been served and saying the ACCC had issued a media release before contacting the company. The ACCC responded in a statement at 5.55pm saying its process-server had delivered the documents to Cabcharge's registered office at 12.18pm, before it issued its media release.

The statement of claim spells out the regulator's view that Cabcharge has steadily increased its market reach in several taxi-related operations and then set out to "eliminate" rivals. Cabcharge's main business is providing non-cash payment systems for taxis and hire cars.

It also supplies and services taxi meters and has a presence in taxi ownership through 10 wholly owned networks and some part investments.

According to the ACCC, the wholly owned networks give Cabcharge affiliation with 5227 of Australia's 18,000 taxis, or 29 per cent. It also owns 441 taxi licences.

The ACCC says that 17,834 taxis around Australia had an Eftpos terminal supplied by Cabcharge in 2008, up from 12,353 in 2002. It says that taxi fares paid using Cabcharge facilities in 2008 were worth $455 million.

The statement of claim says the regulator will rely on admissions Mr Kermode made during a 2007 interview with the ACCC under its powers of compulsion.

For example, the statement refers to a request from a rival, Travel Tab, to process Cabcharge cards and vouchers on Travel Tab's payment system.

The statement says that during his examination Mr Kermode "agreed with the proposition" that Cabcharge's response to Travel Tab "was consistent with Cabcharge's policy to resist all applications by people seeking to process Cabcharge instruments on their Eftpos systems".

It also says the regulator will rely on admissions by Mr Kermode that Cabcharge incurred a loss on the sale of taxi meters that it recouped from the profits of its 10 per cent service fee for its Eftpos services.

It alleges that Mr Kermode accepted that "he understood it would be very difficult for the existing meter manufacturers to compete on a sustainable basis with the Cabcharge Meter for as long as Cabcharge was pricing below cost".

The first court hearing will be in Melbourne on July 21.