Cabcharge agreed to having engaged in the alleged conduct which included:

• Refusing requests to agree, 'on commercial terms, to allow Cabcharge's non-cash payment instruments to be accepted and processed electronically by Travel Tab/Mpos' system for the payment, by non-cash means, of taxi fares by taxi passengers' (refusal 1)
• Refusing 'requests to it by Travel Tab/Mpos to agree, on commercial terms, to allow Cabcharge's non-cash payment instruments to be accepted and processed electronically by Travel Tab/Mpos' system for the payment, by non-cash means, of taxi fares by taxi passengers' (refusal 2)
• Supplying Cabcharge taxi metre units at substantially below Cabcharge's direct cost of acquisition and supplying 'schedule updates for taxi fare rate changes for taxis using the Cabcharge Meter free of charge'. (predatory pricing)

The refusal to supply and predatory pricing conduct was held to contravene s 46, as constituting a taking advantage of substantial market power for a prohibited purpose.

Pecuniary penalties were ordered as follows:

• For refusal 1: $2m
• For refusal 2: $9m
• For predatory pricing: $3m

Cabcharge was also ordered to establish and maintain a Trade Practices Compliance and Education Program. Costs of $1m were also ordered.

As a result of the admissions the issues of law were not complex (for example, Cabcharge conceded that its power in the Processing Market materially facilitated its ability to predatorily price) - but a couple of items of note:

On the issue of market power his Honour stated, at para 11:

A classic definition of market power is “the ability of a firm to raise prices above the supply cost without rivals taking away customers in due time” (emphasis added): Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd [1989] HCA 6; (1989) 167 CLR 177, 188. In Boral Besser Masonry Ltd v Australian Competition and Consumer Commission [2003] HCA 5; (2003) 215 CLR 374, Gleeson CJ and Callinan J said (at [121]) that the essence of market power is the absence of constraint. There are, however, many factors that are relevant to a firm having market power. These include barriers to entry, the absence of competitive constraints and market share.

As part of the conduct occurred after the increase in penalties in 2007, his Honour was required to treat different conduct differently in terms of the award of an appropriate penalty: His Honour stated [emphasis added]:

[para 39] The maximum penalties available differ for each of the three contraventions because of amendments to s 76 of the Act that took effect from 1 January 2007. For the Travel Tab refusal, the maximum penalty is $10 million. For the MPos refusal, the maximum penalty is the greater of: $10 million; three times the total value of the benefit that Cabcharge obtained by virtue of the conduct; and where the benefit cannot be determined, 10% of Cabcharge’s annual turnover of the 12 months ending July 2008. This is not a case where the value of the benefit that has been obtained and is attributable to Cabcharge’s refusal to deal with MPos can be readily ascertained. The relevant maximum penalty is therefore 10% of Cabcharge’s annual turnover for the 12 months ending July 2008; namely $12,837,823.

[para 40] For the predatory pricing contravention, which took place between 2004 and October 2007, the conduct spans both the old and new penalty regimes. The maximum penalty is therefore somewhere between $10 million and $12,837,823 (ie 10% of turnover). As most of the conduct in terms of time and sales occurred under the old regime, the maximum penalty is likely to be closer to the lower end of that range. In any event, it is not necessary to identify the maximum penalty with any precision as it will not materially affect the penalty imposed.

[para 41] The principal purpose of imposing penalties is specific and general deterrence: Australian Competition and Consumer Commission v High Adventure Pty Ltd (2006) ATPR ¶42-091 ...

[para 42] The principles concerning the imposition of penalties are well known. When parties agree on a penalty and approach the court to give effect to their agreement, it still remains the responsibility of the court to determine the appropriate penalty. The court will give effect to the parties’ agreement provided the penalty is within a permissible range, even if the court would have imposed a different penalty. The view of the regulator as a specialist body is important in helping the court assess the relevant penalty.

[para 43] Under s 76, the following factors are relevant to the determination of the permissible range: (1) the nature and extent of the contravening conduct; (2) the loss or damage suffered as a result of the contravening conduct; (3) the circumstances in which the contravening conduct took place; and (4) whether the contravener has previously engaged in similar conduct.

[para 44] The cases also outline several other important considerations: (1) the size of the contravening company; (2) the degree of power the company has, as evidenced by its market share and ease of entry into the market; (3) the deliberateness of the contravention and the period over which it extended; (4) whether the contravention arose out of the conduct of senior management or lower level staff; (5) whether the company has a corporate culture conducive to compliance with the Act, as evidenced by education programs and disciplinary or other corrective measures in response to an acknowledged contravention; and (6) whether the company has shown a disposition to cooperate with the authorities responsible for the enforcement of the Act in relation to the contravention: see eg NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285; and Trade Practices Commission v CSR Ltd [1991] ATPR ¶41-076, ¶52,152-3.

[para 45] I do not propose to go to each factor separately; it will suffice if I address the factors that I place the most reliance on.

[para 46] First, the imposition of a total penalty of $14 million will have a significant specific and general deterrence effect. This is the largest total penalty imposed for contraventions of s 46 of the Act, which partly reflects the new penalty regime and partly the seriousness of the contraventions. The $3 million penalty for the meter conduct is the largest predatory pricing penalty in Australia.

[para 47] Second, Cabcharge’s conduct occurred over an extended period of time and straddled different markets.

[para 48] Third, prior to this proceeding, no court had found that Cabcharge had contravened the Act in any way and the ACCC had not previously commenced legal proceedings against Cabcharge. This reduces the gravity of the Travel Tab refusal and the predatory pricing. However, by the time of the MPos refusal, Cabcharge knew that it was being investigated by the ACCC and s 155 examinations had taken place. This increases the gravity of the MPos refusal.

[para 49] Fourth, Cabcharge is a prosperous public listed company with significant resources. In the 2009 financial year, its profit after tax was $61.4 million and it held around $419 million worth of assets.

[para 50] Fifth, Cabcharge had substantial market power in the Instruments and Processing Markets by virtue of it having the largest market share in each market by a significant margin.

[para 51] Sixth, although Cabcharge was not conscious that it was breaching s 46 of the Act, its conduct was deliberate. ...

[para 52] Seventh, Cabcharge’s most senior employees and management participated in the contravening conduct, including Cabcharge’s Executive Chairman and CEO ...

[para 53] Eighth, Cabcharge is entitled to some discount for cooperating with the ACCC. Its admissions have avoided the need for a lengthy trial (estimated to take at least four weeks and most likely far longer) and the appeals that would likely have followed. However, Cabcharge’s admissions came only five weeks before the trial was to begin and 15 months after the filing of the proceeding. Over 100 affidavits had been filed and three interlocutory judgments have been delivered following several disputes and an appeal to the Full Court. In these circumstances, Cabcharge is not entitled to the discount that would be available had it made its admissions before a significant amount of time, money and effort was expended by the ACCC.

[para 54] Ninth, parity of penalties between cases is important. The best analogy to the Travel Tab refusal is to be found in Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd (2004) ATPR ¶41-983. There, Fila admitted that it had contravened ss 46 to 47 of the Act by threatening to refuse supply to any purchaser who chose to stock a competitor’s products. Heerey J found that Fila was conscious that its conduct might well infringe the Act. This was evidenced by a letter from one of Fila’s competitors and a memo from the Managing Director of Fila. Heerey J stated that the contraventions were serious and “blatant” and occurred over an extended period of time. By contrast, Cabcharge did not appreciate that it may be breaching the Act (although it was alerted by Travel Tab to the existence “anticompetitive guidelines”). In the circumstances, the appropriate penalty for this refusal is less than that in Fila.

...

[para 58] There are however, several factors that work in Cabcharge’s favour: (1) as the ACCC’s lead counsel, Mr Shavin QC, elegantly put it: “Although there were three competitors which were affected, there are no bodies”. This can be compared with Boral Besser Masonry v ACCC, where two parties exited the market as a result of predatory pricing; (2) the conduct was stopped unilaterally by Cabcharge when the ACCC began investigations and when the so-called Birdsville amendments were passed in 2007. The amendments inserted s 46(1AA) into the Act (which prohibits selling below cost for a substantial period for a purpose proscribed by s 46); (3) it is at least arguable that Cabcharge’s primary purpose in selling meters below cost was to gain a foothold in a market in which it was a new entrant, which is not a proscribed purpose; and (4) Cabcharge is entitled to the relevant discount.

[para 59] Conversely, Cabcharge’s predatory pricing contributed to it selling 50% of all new meters installed between September 2004 and October 2007. While I believe that $3 million is at the low end of the acceptable range for this type of conduct, it narrowly falls within the range I would deem permissible, taking into account the total penalties imposed in this case and the fact that this is still the largest predatory pricing penalty ever imposed in Australia.

...

Go to full case at AustLII