Commission Accuses Cabcharge for Misusing Market Power to Eliminate Competitors

Submitted by Jim Thesiger on 3 July, 2009 - 14:00

A lawsuit was filed by the Australian Competition and Consumer Commission (ACCC) yesterday against Cabcharge Australia (CAB), a company that is operated by the Sydney Taxi operator Reg Kermode. In the lawsuit ACCC has accused Cabcharge for misusing its market power in an attempt to eliminate its competitors from the market.

If the allegation is proven, this will be considered as the breach of section 45 and 46 of the Act of Trade Practice and in that case Cabcharge might have to pay a penalty of $10 million for each infringement. In addition, the company can also face a penalty of paying 10 percent of its revenue under the changes of the law from 2007. Further confirmation is required regarding the overall potential penalty. The first court hearing of the lawsuit is expected to be held on 21st July in Melbourne.

However, the Cabcharge authority has denied the allegations. In a statement issued to the Australian Security Exchange at 3:14 pm, the company claimed that it did not receive any paper works from ACCC regarding the lawsuit. In response ACCC has issued its statement at 5:55 pm where it mentioned that the documents regarding the lawsuit was delivered to the Register office of Cabcharge at 12:18 pm.

Cabcharge is mainly involved in the business of providing non-cash payment facilities to the taxis and hire cars. It is a prime supplier of taxi meters and also offers maintenance service for the supplied equipments. The company issues credit cards and vouchers to the taxi passengers.

Cabcharge owns 441 taxi licences and 10 taxi networks, something that affiliates the company with 29 percent of Australia’s total number of Taxis. Cabcharge had seen its revenue jumping up to $173 million last year from $151 in the year 2007.

According to the Commission, in the year 2008 17,834 taxis from all over Australia had Eftpos terminal which were supplied by Cabcharge. The commission also mentioned that around $455 million worth of taxi fares were paid by the passengers through the Cabcharge facilities.

According to the statement of claim, the regulator will initiate its investigation on the basis of Mr. Kermode’s interview with ACCC in 2007 where at one stage he admitted that Cabcharge has incurred a loss in its meter sale that later the company recovered from its revenue generated from its Eftpos service. Mr. Kermode also admitted that it would not be easy for its rivals to compete with Cabcharge at the long run if the company continues to sell its meters in a price below the cost.