Australian Competition Tribunal Decisions

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AUSTRALIAN COMPETITION TRIBUNAL

Application by Michael Jools, President of the New South Wales

Taxi Drivers Association [2006] ACompT 5

TRADE PRACTICES � authorisations of third line forcing � comparison of benefits and detriments

Trade Practices Act 1974 (Cth) ss 90(6), 90(8), 91B

Australian Association of Pathology Practices Incorporated [2004] ACompT 4 followed

John Dee (Export) Pty Ltd, Re (1990) ATPR �41-006, questioned

Media Council of Australia, Re (1996) ATPR �41-497 followed

Rural Traders Co-operative (WA) Ltd, Re (1979) 37 FLR 244 followed

VFF Chicken Meat Growers� Boycott Authorisation, Re [2006] ACompT 2

7-Eleven Stores Pty Limited, Re (1994) ATPR �41-357 followed

APPLICATION BY MICHAEL JOOLS, PRESIDENT OF THE NEW SOUTH WALES TAXI DRIVERS ASSOCIATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 11 MARCH 2005 NOT TO REVOKE AUTHORISATIONS IN RELATION TO DE LUXE RED & YELLOW CABS CO-OPERATIVE TRADING SOCIETY LTD (A30112), LEGION CABS (TRADING) CO-OPERATIVE SOCIETY LIMITED (A90441), RSL EX-SERVICEMEN�S CABS & CO-OPERATIVE MEMBERS LTD (A90448), ST GEORGE CABS CO-OPERATIVE LTD (A90531), ARROW TAXI SERVICES LTD (A90449), REGAL COMBINED TAXIS PTY LTD (A90447), GEELONG RADIO CABS CO-OPERATIVE LTD (A90463), NORTH SUBURBAN TAXIS LTD (A90455), SILVER TOP TAXI SERVICE LTD (A40047), BLACK CABS AND EASTERN GROUP TAXIS CO-OPERATIVE LTD (A90498), WEST SUBURBAN TAXIS LTD (A40071) and SUBURBAN TAXI SERVICE PTY LTD (A90472)

File No 3 of 2005

FINKELSTEIN J (Deputy President), M STARRS (Member) & R SHOGREN (Member)

27 JUNE 2006

SYDNEY

IN THE AUSTRALIAN COMPETITION TRIBUNAL

No 3 of 2005

RE:�� APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 11 MARCH 2005 NOT TO REVOKE AUTHORISATIONS IN RELATION TO DE LUXE RED & YELLOW CABS CO‑OPERATIVE TRADING SOCIETY LTD (A30112), LEGION CABS (TRADING) CO‑OPERATIVE SOCIETY LIMITED (A90441), RSL EX‑SERVICEMEN�S CABS & CO‑OPERATIVE MEMBERS LTD (A90448), ST GEORGE CABS CO‑OPERATIVE LTD (A90531), ARROW TAXI SERVICES LTD (A90449), REGAL COMBINED TAXIS PTY LTD (A90447), GEELONG RADIO CABS CO‑OPERATIVE LTD (A90463), NORTH SUBURBAN TAXIS LTD (A90455), SILVER TOP TAXI SERVICE LTD (A40047), BLACK CABS AND EASTERN GROUP TAXIS CO‑OPERATIVE LTD (A90498), WEST SUBURBAN TAXIS LTD (A40071) and SUBURBAN TAXI SERVICE PTY LTD (A90472)

BY:�� MICHAEL JOOLS, PRESIDENT OF THE NEW SOUTH WALES TAXI DRIVERS ASSOCIATION

Applicant

THE TRIBUNAL:

FINKELSTEIN J (Deputy President)

M STARRS (Member)

R SHOGREN (Member)

DATE OF DETERMINATION:

27 JUNE 2006

WHERE MADE:

SYDNEY

THE TRIBUNAL DETERMINES THAT:

1. The authorisations numbered A30112, A90441, A90448, A90531, A90449, A90447, A90463, A90455, A40047, A90498, A40071 and A90472 be set aside.

IN THE AUSTRALIAN COMPETITION TRIBUNAL

File No 3 of 2005

RE:�� APPLICATION FOR REVIEW OF THE DETERMINATION OF THE AUSTRALIAN COMPETITION AND CONSUMER COMMISSION MADE ON 11 MARCH 2005 NOT TO REVOKE AUTHORISATION IN RELATION TO DE LUXE RED & YELLOW CABS CO‑OPERATIVE TRADING SOCIETY LTD (A30112), LEGION CABS (TRADING) CO‑OPERATIVE SOCIETY LIMITED (A90441), RSL EX‑SERVICEMEN�S CABS & CO‑OPERATIVE MEMBERS LTD (A90448), ST GEORGE CABS CO‑OPERATIVE LTD (A90531), ARROW TAXI SERVICES LTD (A90449), REGAL COMBINED TAXIS PTY LTD (A90447), GEELONG RADIO CABS CO‑OPERATIVE LTD (A90463), NORTH SUBURBAN TAXIS LTD (A90455), SILVER TOP TAXI SERVICE LTD (A40047), BLACK CABS AND EASTERN GROUP TAXIS CO‑OPERATIVE LTD (A90498), WEST SUBURBAN TAXIS LTD (A40071) and SUBURBAN TAXI SERVICE PTY LTD (A90472)

BY:�� MICHAEL JOOLS, PRESIDENT OF THE NEW SOUTH WALES TAXI DRIVERS ASSOCIATION

Applicant

THE TRIBUNAL:

FINKELSTEIN J (Deputy President)

M STARRS (Member)

R SHOGREN (Member)

DATE:

27 JUNE 2006

PLACE:

SYDNEY

REASONS FOR DETERMINATION

1 Mr Jools is the President of the New South Wales Taxi Drivers Association.� He is dissatisfied with a decision of the Australian Competition and Consumer Commission purportedly �in relation to the revocation of an authorisation�.� The decision with which he is dissatisfied is a decision not to revoke several authorisations which the Commission�s predecessor, the Trade Practices Commission, had granted some years ago to certain taxi networks.� The authorisations permit the networks to penalise or suspend drivers from the use of the network�s radio booking facilities for failing to display the taxi hiring accounts or credit systems approved by the networks.� The networks can also penalise or suspend drivers who fail to accept approved hiring accounts or credit systems for payment of fares.�

2 Mr Jools has applied to the Tribunal under s 101(1) of the Trade Practices Act 1974 (Cth) for a review of the decision.� There is no doubt that in his representative capacity (which is the basis upon which he made the application) Mr Jools has a �sufficient interest� to review the decision thereby triggering the Tribunal�s jurisdiction (see s 101(1AA)) to determine the matter.� This is on the assumption (an assumption which has not been called into question) that the Commission�s decision not to revoke an authorisation is a decision �in relation to the revocation of an authorization� as required by s 101(1)(b).� So far as procedure is concerned, the legislation requires the review to be conducted as a re-hearing:� s 101(2).�

3 The background can be sketched briefly.� The taxi cab industry (so called) is comprised of licensed owners of taxis (State legislation requires owners to be licensed), taxi operators who lease their taxis from an owner, taxi networks (State legislation obliges each operator to belong to a network) the principal activity of which is to provide radio booking and dispatch services to taxi operators, and taxi drivers who are engaged by licensed owners or taxi operators to drive taxis.�

4 A taxi can be hired by a telephone or internet booking, hired from a rank or hailed in the street.� The hire fare is �paid� to the driver in cash, by voucher in the case of a customer who has (or whose employer has) an account with the operator, or by credit card which, strictly speaking, may be a credit, debit or charge card.� In the early 1980s the payment of hire by a credit system was a new but growing phenomenon.� Cabcharge Australia Limited was established by ten taxi networks to provide a credit service for use in taxis.� At first it employed a voucher system but later added credit cards.� At the time (that is in the 1980s) other credit cards that could be used to pay taxi hire fares included Bankcard, American Express and Mastercard.�

5 Initially taxi drivers were not obliged to accept payment by voucher or credit card.� However, many people thought that the public would be benefited if taxi drivers were required to accept a credit system.� The networks that had established Cabcharge decided to require their taxi operators to exhibit by decal (a transfer) a single credit system which they (the networks) approved and to require drivers to accept payment by that system.� The networks had in mind requiring drivers to accept payment by the charge facility offered by Cabcharge and other credit companies (in particular American Express and Diners Club) with which Cabcharge had entered into agency agreements.� By these agency agreements Cabcharge undertook to promote in taxi cabs the acceptance of the credit system provided by Cabcharge and to act as collection agent for the credit company.� The networks proposed to secure compliance by taxi drivers with the requirement to exhibit and use the type of credit system which they (the networks) had approved by the imposition of a fine or the suspension of the taxi driver from the networks� radio booking facility for failure to meet the requirement.

6 The problem with the proposal was that it amounted to what is known as third line forcing and if implemented would have been in contravention of s 47(6) or s 47(7) of the Trade Practices Act.� Recognising this, some networks applied to the Trade Practices Commission for an authorisation under s 88(8).� In order to grant the authorisation the Commission was required by s 90(8) to be satisfied that the implementation of the proposal �would result, or be likely to result, in such a benefit to the public� that its implementation should be allowed.� This may be contrasted with an application for authorisation of conduct that would contravene other provisions of Pt IV (for example, the exclusive dealing prohibition in s 47) where the Commission must be satisfied that the �benefit [to the public] would outweigh the detriment to the public constituted by any lessening of competition that would result, or be likely to result� if the proposed conduct were engaged in:� see s 90(6).� The difference might be explained by the fact that in almost all cases third line forcing has an anti-competitive effect, and if it is to be the subject of an authorisation on public benefit grounds a net benefit test may be too strict.�

7 Despite the difference in language, and the likely explanation for it, the Tribunal has proceeded on the basis that it is still necessary to have regard to any detriment that may be caused (an uncontroversial approach) and to grant the authorisation only if it is satisfied that there is, or is likely to be, a net benefit to the public if the proposed conduct is permitted.� See, for example, Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244, 261, a case which considered the effect of s 90(9).� It may be accepted that in most cases the net benefit test is the appropriate test to apply when deciding whether there should be authorisation for third line forcing.� But we think it may be wrong to hold that the existence of a net benefit is a necessary pre-condition for an authorisation.� This is not what the section provides.� Further, as the Tribunal noted in Re VFF Chicken Meat Growers� Boycott Authorisation [2006] ACompT 2 (at [71]) �The test is one of public benefit � not confined to competition issues.�

8 The difference between s 90(6) and s 90(8) has been noted in Australian Association of Pathology Practices Incorporated [2004] ACompT 4.� There the Tribunal said (at [93]-[94]):

�Re Rural Traders and subsequent cases have proceeded upon the basis that where the phrase �such a benefit to the public� is used in s 90, the reference is to a net benefit even though the subsection does not specifically designate a weighing of benefit and detriment. We agree with that view. But it does not follow, with respect, that the two tests are precisely the same. That is because s 90(6) limits the consideration of detriment to �the detriment to the public constituted by any lessening of competition� resulting from the relevant conduct, whereas no such limitation is to be found in s 90(8).

In the present case, the AAPP relies upon alleged detriments to the public which arise from the arrangements or conduct for which authorisation is sought arising otherwise than by a lessening of competition. If those detriments are established, then in our view, they should be taken into account in determining pursuant to s 90(8) whether the proposed conduct is likely to result in such a benefit to the public that the proposed conduct should be allowed to take place. The cases to which we have referred do not decide otherwise, as they do not directly address the question. Rather, they were cases in which the relevant detriment was constituted by a lessening of competition, and for that reason it was correct to say that in the particular circumstances of those cases, there was no significant difference between the practical effect of subs 90(6) and subs 90(8): cf Re Obadiah Pty Ltd (The Locksmith�s Case) (1980) ATPR 40-176 at 42,431.�

9 The first application considered by the Commission was that of the Deluxe Red & Yellow Cabs Co-operative.� The conduct for which authorisation was sought was to penalise by fine or suspend a driver for (1) failing to display radio numbers or decals of approved taxi hiring account systems; (2) failing to accept those hiring account systems in satisfaction of fares; and (3) displaying decals of other accounting systems.� The Commission accepted that there would be a benefit to the public if taxi drivers were required to display and offer a credit system.� It is not necessary to go into the reasons.� However, the Commission rejected the contention that the network should be able to insist that taxi drivers refrain from using other credit systems.� On this aspect the Commission said there would be �a very clear public detriment � in that consumers [would be] denied opportunities to use credit card facilities of their choice through the taxi cab network�.�

10 The result was that the Commission did not grant an authorisation in the terms in which it had been sought.� Instead it granted an authorisation limited to the following practice:�

�The penalizing or suspension from the use of radio booking facilities by the Co-operative of its members or drivers as a result of the failure by members or drivers to display radio numbers and/or decals of taxi hiring account or other credit systems which have been approved from time to time by the directors and/or failure of those members or drivers to accept those hiring account or other credit card systems in satisfaction of fares for any hirings.�

The authorisation so granted had no temporal limit.� Between 20 October 1986 and 27 April 1994 authorisations in substantially the same terms were granted to 11 other networks.� None of these authorisations had a temporal limit.

11 Section 91B(3) provides that the Commission may commence the process for the revocation of an authorisation if it appears that the authorisation was granted on information that was false or misleading in a material particular (s 91B(3)(a)) or if a condition of the authorisation has not been complied with (s 91B(3)(b)) or if �there has been a material change of circumstances since the authorization was granted� (s 91B(3)(c)).� The subsection goes on to require the Commission to inform interested persons that it is considering the revocation of an authorisation and to invite submissions.� Section 91B(5) provides that if there is an objection to the revocation the Commission must not revoke the authorisation �unless the Commission is satisfied that it would, if the authorization had not already been granted, be prevented under subsection 90(6), (7), (8) or (9) from making a determination and granting the authorization in respect of which the revocation is sought.�� The effect of s 91B(5) is that if it receives an objection then at some point the Commission must consider the position as if it were dealing with a fresh application for an authorisation.� If, in that situation, the authorisation could not be granted then the Commission is bound to revoke the authorisation.� In all other circumstances the Commission must decide which is the better or preferred course to take on the material in its possession.

12 In the instant case the Commission embarked upon the revocation process because of a change of circumstances.� In substance the changed circumstance was that since the authorisations payment for goods and services by credit card had become almost universally accepted by retailers and consumers alike, so that taxi drivers would accept most credit cards without the need for an authorisation of conduct that would require them to do so.� In its own words, the Commission decided that most taxi drivers would accept �the most recognised and widely held credit cards as a matter of course.�� In light of these changed circumstances the Commission felt there may no longer be any public benefit by the continuation in force of the authorisations.�

13 However, following a full consideration of the matter the Commission decided that the authorisations should not be revoked.� It concluded that there was a small public benefit to be gained by keeping the authorisations in force and this small public benefit marginally outweighed the negligible public detriment caused by the authorisation.

14 In arriving at this conclusion the Commission considered the position in relation to the following markets:� (1) the provision of taxi services to the public; (2) the provision of radio booking services to taxi operators and drivers; (3) the provision of non-cash payment methods for use in taxis; and (4) the processing of non-cash payments of taxi fares.� This approach was not criticised and seems to us to be correct.� Further, the Commission proceeded on the basis that the geographic boundaries for each market were State-based for the reason that taxis are subjected to State-based regulation.� This also was not the subject of criticism.��

15 The premise upon which the Commission acted was that even without the authorisations, credit card and voucher payments would continue to be widely accepted in taxis and the display of decals of the credit system or systems that were acceptable would be likely to continue.� Moreover, normal market forces were likely to ensure that consumers would be offered the opportunity to use their preferred method of payment.� The benefit of continuing the authorisations was that without them it could not be guaranteed that all operators of the authorised networks and their drivers would continue to offer credit systems.�

16 In its determination the Commission described the public benefit in the following way:�

�9.24:The [Commission] accepts that there is public benefit to consumers from being able to pay for a taxi fare by their preferred method of payment.� Having regard to the counterfactual, namely that the cards and vouchers are likely to continue to be widely accepted in taxis without the authorisations, the weight attached to this benefit by the [Commission] is marginal.

9.25:�� The [Commission] notes, however, that the authorisations provide certainty to the network that cards and vouchers will always be accepted.� In turn, this allows the network to provide the same certainty to the public.� With revocation there may be some uncertainty that on occasion cards and vouchers may not be accepted, although the [Commission] is of the view that in practice cards and vouchers are likely to continue to be widely accepted.

9.26:�� Overall, the [Commission] accepts that there is a small public benefit flowing from the certainty that cards and vouchers will always be accepted in taxis.�

17 On the detriment side, the Commission had regard to a number of factors.� One was whether the penalty of suspension that could be imposed if a taxi driver breached a direction to use a particular credit system might mean that the driver could be forced out of business.� The Commission accepted that this was a theoretical detriment but went on to say that �in light of the counterfactual the cards and vouchers are likely to continue to be widely accepted without the authorisations, the sanctions may be largely inconsequential in practice and therefore be of negligible public detriment.��

18 In relation to the imposition of a requirement that taxi drivers accept non-cash payment methods the Commission was of the view that �there is no public detriment resulting from the authorised conducts in the market(s) associated with the provision of non-cash payment methods in taxis.��

19 Another factor which the Commission considered related to the processing of non-cash payments. �Here the issue was as follows.� Since the grant of the authorisations, each network has nominated the credit system provided by Cabcharge as the system to be accepted by drivers.� Over time Cabcharge introduced EFTPOS terminals as the method by which its credit card could be processed.� As a result almost every taxi now has installed in it a Cabcharge EFTPOS terminal; the evidence is that such a terminal is to be found in at least 90 per cent of all taxis.� These terminals have gained such a stranglehold on the market for the provision of non-cash payments that there appears to be a restriction of competition in relation to electronic processing systems.�

20 The Commission accepted that in the current circumstances there was no alternative for the processing of Cabcharge cards other than through Cabcharge EFTPOS terminals, or the very occasional use of a manual processor.� The problem was that Cabcharge had not authorised another credit system provider to act as its collection agent and process its cards or vouchers.� For that reason, given the commercial importance of Cabcharge to taxi operators they (the operators) would only consider making use of other EFTPOS terminals and processing service providers in addition to but not in substitution for Cabcharge EFTPOS terminals.� Although it was obviously concerned about the anti-competitive effect of an entrenched processing system for non-cash payments the Commission said that this �[did] not appear to be linked to the authorisations.��

21 In summary then, the Commission found that the public benefit generated to consumers when the authorisations were first granted was significant and helped to establish the availability and acceptance of non-cash payment methods in the taxi industry and for this reason the authorisations proved to be very effective.� It noted that the situation where cards and vouchers were widely accepted by taxi operators and drivers would likely continue but that overall �there is a small public benefit flowing from the authorisations in the certainty that card and voucher payments will always be accepted in taxis.�� Hence it refused to revoke the authorisations.

22 It is implicit in the Commission�s approach that any public benefit or (if detriments are brought to account) any net public benefit, however small, is sufficient to meet the public benefit requirement of s 90(8).� This view is not self-evidently correct.� It must be remembered that, as in this case, an authorisation may be granted in respect of conduct which if engaged in in the absence of authorisation will result in the commission of a per se offence, that is an offence which Parliament has assumed will by its very nature have an anti-competitive effect.� One should also not forget the very high penalties that can be imposed in respect of a contravention of provisions for which an authorisation may be granted.� These factors at least suggest that something more than a negligible benefit is required before the power to grant authorisation can be exercised.� Even if the power to grant an authorisation were triggered, these factors at the least indicate that if particular conduct will give rise to only a negligible benefit perhaps the conduct should not be authorised.�

23 However the power to grant an authorisation is to be exercised in a particular case, we note that the Tribunal has given a very wide meaning to public benefit, so wide that any benefit may trigger the power to grant an authorisation.� In Re 7-Eleven Stores Pty Limited (1994) ATPR �41-357, one of the leading decisions in this area, the Tribunal said (at 42,677):�

�Public benefit has been, and is, given a wide ambit by the Tribunal as, in the language of QCMA [(1976) ATPR �40-012] (at 17,242), �anything of value to the community generally, any contribution to the aims pursued by the society including as one of its principal elements (in the context of trade practices legislation) the achievement of the economic goals of efficiency and progress�.� Plainly the assessment of efficiency and progress must be from the perspective of society as a whole:� the best use of society�s resources.� We bear in mind that (in the language of economics today) efficiency is a concept that is usually taken to encompass �progress�; and that commonly efficiency is said to encompass allocative efficiency, production efficiency and dynamic efficiency.��

24 On one view, however, it might fairly be said that a small or negligible benefit (that is, a benefit that can barely be measured) would not result in any efficiencies, and so would not meet the public benefit requirements, of s 90(8).� The other view is that provided any measure of efficiency will result from proposed conduct, the power to grant the authorisation exists.� Whether or not the power is exercised in a particular case is of course another matter.

25 However that may be, the manner in which the existence of a relevant benefit is to be determined is to �compare the position which would or would be likely to exist in the future, on the one hand if authorisation were to continue, and on the other hand if it were absent�:� Re Media Council of Australia (1996) ATPR �41-497, 42-241.� This was the approach that was taken by the Commission and it is the approach we will follow on the review.

26 As events have transpired the only parties who appeared on the hearing of the review were the applicant, Mr Jools, and Cabcharge which, not being an original party, was given leave to intervene.� In addition, the Commission appeared to assist the Tribunal.� The networks, who are parties to the application decided not to appear, although we have their submissions and they have been taken into account.� The Tribunal also has the evidence that was before the Commission.� Additionally it has statements of witnesses which were not before the Commission.� Importantly, the Tribunal has the benefit of oral evidence adduced from three witnesses from the taxi industry, Mr Bramston, the chief executive officer of Aerial Consolidated Transport which operates Canberra Cabs; Mr Ahmed, a taxi driver of 20 years; and Ms Strathmore, who has worked as a taxi driver and an operator and is the current secretary of the Taxi Drivers Association.� Their evidence was not before the Commission.�

27 Having heard the evidence and read the parties� submissions it is apparent there is little by way of any factual dispute that must be resolved.� Indeed, when the networks were still active participants in the proceeding they and Mr Jools had reached agreement on the facts that were to be the basis upon which the review was to be conducted.� A copy of their agreed statement of facts appears at the end of these reasons.�

28 The first thing which we should observe is that it is clear not only from the agreed statement of facts but also from the evidence, especially that of Ms Strathmore, that the future with-and-without test caused the Commission to correctly predict that without the authorisations credit card and voucher payments will continue to be widely accepted in taxis.� So also will the display of decals continue.� On this aspect it is sufficient to refer to evidence given by Ms Strathmore in answer to questions put first by the Tribunal and then by Mr Jools:�

�[TRIBUNAL]:� Can I just follow up on that.� Is the business practicality affected in any way by the authorisation?---No, not at all. The authorisation � it doesn�t affect the taxi industry.

What I�m trying to get at, it sounds as if none of this would change if Manly-Warringah wasn�t subject to the authorisation?---We�re not subject to it.

Okay, so from the operator�s point of view does it make any difference whether you�re with a network that does have an authorisation or doesn�t?---None whatsoever.� All I want to do is put a cab on the road that has every possible thing that I can put in it so I can attract the broadest range of drivers to get in it and drive it.� If I have a cab that doesn�t have an EFTPOS system I will invariably have drivers that won�t drive because they want that facility.� If I have a cab that doesn�t have a baby capsule I invariably have drivers that say, No, I want the additional work that a baby capsule can bring me, I want a cab with a baby capsule.� I�m dominated by market forces by what my drivers are asking me for, so hence I have to make the cab, what is in the cab, as broad as possible.� I need an EFTPOS system in there. �It�s market forces.� Credit facilities have got to be in cabs.

MR JOOLS:� Just to reiterate that other point of the Tribunal---?---It�s market forces. It�s got nothing to do with the authority.

And at the moment the only way of meeting those market forces is with the one device that accepts all cards. --- Yes.�

29 This evidence should be understood in light of Ms Strathmore�s earlier evidence that it is not feasible to use a processing system other than the Cabcharge EFTPOS system because �there is no competition [system] that takes all the cards that I want to have available in the cabs.� Cabcharge is the only system that takes Cabcharge�.� She said that it was not economical to have two systems in each taxi (although a handful of drivers do have two systems), but if there was another system that took all credit cards she would �be there within minutes�.� The reason is the 10 per cent service fee that is charged by Cabcharge.

30 Ms Strathmore�s evidence that market forces will ensure that credit systems will continue to be offered receives strong confirmation from the current situation.� The 12 authorisations that were granted do not cover the whole of the taxi industry.� Throughout Australia there are hundreds if not thousands of taxis whose drivers belong to networks that have never been granted an authorisation.� These drivers accept credit cards or vouchers because it is for them a financial necessity and hence there is no need for any coercion.

31 In fact, apart from the evidence of Mr Bramston that some drivers might refuse to take credit cards but if pressed would do so and the evidence of Mr Ahmed which was to the effect that he had a right to be paid in �the legal tender of Australia which is dollars and cents�, there is little evidence of drivers refusing to accept payment by credit card.� We put to one side as a special case the situation when a driver will not accept a credit card payment because he or she suspects fraud or some other risk.� It may nevertheless be accepted that a handful of drivers will demand cash if they can get away with it.� Ms Strathmore may have had these drivers in mind when she said:�

�At 2 o�clock in the morning, on a Saturday morning in Manly the cab driver is going to say, �I want cash� because there is only four cabs and there is 4000 passengers he can say whatever he likes and the authorisation is not going to effect him.� It hasn�t for the last 20 years, and it is not going to start at the end of this week or next week.� When, you know, the supply of cabs is small he can pretty much say whatever he likes and people will agree because they want the cab.� They want to go home.� The authorisation doesn�t effect [sic] the average driver at all and it doesn�t effect [sic] the public at all.� Market forces are what determine.� The same driver who says, �No, I want cash� at 2 o�clock on a Saturday morning will accept paper and card dockets Monday, 6 am through to, you know, all of business hours because he wants to get paid and he doesn�t care what form he gets paid in as long as he gets paid.�

32 We note that Mr Jools accepts that there is some benefit to the public in the certainty that a credit card payment will be accepted by taxi drivers.� The statement of agreed facts records:

�4.2�� The acceptance of the Networks payment systems by all members and drivers of the Networks means that members of the public can be certain that the Networks payment systems will be available to them, when hiring a Network taxi subject to any terms and conditions (to the extent that they exist).

4.3�� The acceptance of the Network payment systems by all members and drivers of the Networks allows a member of the public hiring a taxi affiliated to a Network to choose his/her preferred method of payment when hiring that taxi.�

33 But in light of the evidence we think that the �certainty� of a credit payment system being available to the public is potentially an illusory benefit.� It is potentially illusory because the risk of the system not being maintained if the authorisations are revoked is so very slight.�

34 In any event, if the authorisations are not revoked and, for one reason or another, a driver refuses to accept payment otherwise than in cash and as a result is punished, there is a detriment that should be brought to account.� We do not mean that it is the punishment itself that is the relevant detriment.� If the punishment is by fine, that is simply a wealth transfer.� In the case of a suspension there is the possibility of a disruption to the market for the provision of taxi services, but as there is such a large pool of drivers who could quickly enter the market, any disruption will be imperceptible.� The detriment (or potential detriment) of which we speak is the cost of detecting drivers who do not accept payment by a credit system as well as the cost associated with imposing a punishment.� These costs are detriments because they are incurred in an inefficient economic activity:� the two costs could be better directed to producing more efficient service.� But, as with the benefit of �certainty� the costs under discussion will be minimal because, if there be no other reason, the number of taxi drivers who will breach the requirement will inevitably be small.�

35 There is another potential detriment that must be considered.� It is a detriment about which there is a substantial difference of opinion between the Commission and Mr Jools as to its cause.� The difference arises in the following way.� We have already noted that most taxis have had installed a Cabcharge EFTPOS terminal and that the evidence suggests that 90 per cent of taxis have the Cabcharge EFTPOS terminal.� The EFTPOS terminal processes not only Cabcharge credit cards but credit and debit cards issued by organisations for which Cabcharge had agreed to act as collection agent.� Cabcharge charges a 10 per cent processing fee to its customers and to the principals for whom it acts as collection agent or in its merchant provider role.� This fee has been in place for many years.� Mr Jools argues that owners and operators are in a practical sense locked into the use of the Cabcharge EFTPOS terminal � although a handful of operators and drivers do use another system.� As a result there is no downward pressure on the 10 per cent service fee charged by Cabcharge which has been in place for many years.� This lack of pressure indicates there are significant barriers to entry in relation to the market for the provision of payment processing systems.�

36 The Commission counters Mr Jools� arguments by making two points.� The first is that the authorisations are non-exclusive so that any card issuer or EFTPOS provider can make their services available to taxi operators and it is a commercial decision for the operator to choose those services or not.� This argument is technically correct, but it ignores the realities.� The realities were explained by Ms Strathmore (an explanation which we accept).� She said:

�Q:� So whilstsoever [sic] the driver has an option to use drivers dockets and factor them and so on ---?� A:� A lot of drivers like the EFTPOS system because it�s perceived to be safe.� That it�s approved online and the dockets are not going to come back to them.� A lot of drivers like the EFTPOS and really won�t get in a cab without that facility.� If I give them a system where they can�t check online reasonably immediately that the E-ticket or the card is secure they won�t take the cab.

Q:� The question I asked ---?� A:� So I really do have to have an EFTPOS system in the cab that can take all cards, that can take every available payment.

Q:� The question I was directing was that if in the future the docket system of blue dockets or swiping is not available then you would have no choice but to have an EFTPOS machine supplied by Cabcharge?� A:� Unless another supplier can get Cabcharge on their EFTPOS terminal, yes I�ve got no choice, it�s got to be Cabcharge.�

37 This makes sense.� It is verified by the fact that very few taxi drivers use an alternative system (perhaps 500-600 Australia-wide).� It may be that more would do so if an alternative system could process Cabcharge credit cards.� But that can only happen with Cabcharge�s consent, and its consent is not likely to be forthcoming while Cabcharge is able to maintain its virtual monopoly on EFTPOS systems in taxis.�

38 The second answer is that the restrictions or barriers to entry are not the result of the authorisations because the authorisations do not permit the networks to designate a particular method by which credit services are to be processed.� It is true that the authorisations do not permit a network to specify a processing system that must be used by a taxi driver, although they are rather badly worded and some think they have that effect.� At least the parties (including the networks) have proceeded on the basis that the authorisations do not go so far.� But acceptance of that proposition says nothing about the effect of the authorisations in the relevant market.� For reasons which we think are now apparent there can be no doubt that the practical effect of the authorisations has been to compel networks and drivers to install Cabcharge EFTPOS terminals.�

39 We have approached the existence of a causal connection between the authorisations and a particular consequence not as a philosophical question or one that can be reduced to a formula, but rather as a question of commonsense.� The commonsense position we take is that the authorisations have led to the nomination of Cabcharge as a credit provider, that when they became available taxis were practically-speaking bound to install Cabcharge EFTPOS terminals.� Where other terminals have been installed side by side in taxis, they have provided complementary services to the taxi operator such as trip information, but have not duplicated the Cabcharge terminal because they have not been able to accept Cabcharge cards or, generally, debit cards either.

40 The position now is that it is extremely difficult for competing terminals to replace Cabcharge terminals, that is for a new entrant to provide a processing system and terminal as an alternative to Cabcharge.� To do so would require establishing a customer base which is content not to be able to use Cabcharge cards.� The existence of the 10 per cent Cabcharge surcharge is an incentive for new entry.� Past attempts have been made, but they have failed.� We see this as caused by the authorisations.� Theyhave created barriers to entry and have allowed Cabcharge to become dominant.

41 The Commission concedes that if this outcome is linked to the authorisations, it would constitute a relevant detriment �in restricting competition for processing services and the bargaining position of taxi operators and drivers.�� But it says that the practical requirement that taxi operators and drivers use a Cabcharge EFTPOS terminal to process Cabcharge and all other cards is likely to remain even if the authorisations are revoked for the simple reason that only a Cabcharge EFTPOS terminal takes the full range of credit cards available in the market.�

42 As we understand the facts this is a difficult conclusion to contradict.� But the matter does not end there.� We have to consider the likely future of the market if the authorisations were to continue in effect.� Putting to one side their past impact in facilitating Cabcharge�s dominance, do the authorisations continue to make new entry and competition less likely than would otherwise be the case?�

43 An entrant with a new or more efficient method of processing credit cards or their equivalent, who had lower installation and processing costs, or who was simply prepared to accept lower profits, could conceivably make inroads in the market.� But assuming that in the short to medium term Cabcharge did not allow its cards to be processed by the new entrant (as is most likely), it would be a risky venture requiring large financial resources, perseverance, and possibly the ability to withstand losses for some considerable period.� If entry of a new processing system could be sustained, eventually Cabcharge may be forced to have its own cards processed by that alternative method or otherwise lose custom.�

44 On one view the chances of such competition developing would be greater in the absence of the authorisations.� With the authorisations in place, and with in every instance of authorisation the Cabcharge system being approved and required to be displayed by drivers, the opportunities for a new entrant to market its alternative system are severely reduced.� There could be no inducement for an operator working under an authorisation to supplement all its Cabcharge terminals with alternative terminals that do no accept Cabcharge cards.��

45 On this view, in the absence of the authorisations every operator would at least be a potential customer for a new entrant.� True it is that if the new system could not process Cabcharge cards this would be a major hindrance to the new entrant.� Yet the new entrant could seek to persuade operators, not only those without authorisations, to try its system.� This might be especially pertinent if, for instance, the new system was completely different, such as a system that uses stored credits.

46 We know that Cabcharge is introducing e-tickets to replace Cabcharge vouchers, which are not processed by a terminal and provide a highly negotiable (by factorers) form of payment to drivers.� This development is likely to cement Cabcharge�s market position further by reducing the alternatives to use of Cabcharge terminals.� It would leave cash as the single alternative means of payment.�

47 The other side of the coin is this.� Even in the absence of the authorisations it is difficult to see what incentive Cabcharge has to permit its credit cards to be used in other systems.� Cabcharge did not need the authorisations to convince networks to accept their systems.� They introduced their system in a number of networks that have not had the benefit of an authorisation.� There is no reason to think this will not continue in the future.� This dominance is likely to persist with the introduction of the e-ticket.�

48 In Re VFF Chicken Meat Growers� Boycott Authorisation [2006] ACompT 2 the Tribunal said (at [83]) that in relation to benefits or detriments �there must be a real chance that [they] will eventuate, rather than merely being �possible� or even �more probable than not�.�� On the view that we take it is not possible to say with this degree of certainty that the removal of the authorisations will have a pro-competitive effect even in the case of the e-ticket.�

49 For the sake of completeness we note that Mr Jools pointed to another detriment, this time a detriment suffered by drivers.� This detriment arises from improper or fraudulent use of credit cards. Certain credit system providers, such as American Express, do not immediately process information on lost or stolen cards which means that fraudulent transactions can go unnoticed for a time while, in the meantime, payment has been approved by the Cabcharge system.� When the provider (for example American Express) later refuses to honour the transaction, Cabcharge seeks reimbursement from the operator or driver.� In reality it is often the operator and not the driver upon whom this obligation ultimately falls, because it is often difficult for the operator to track down the driver and recover any amounts that he or she has been paid.� However that may be, the obligation to repay money which ought not to have been received in the first place (which after all is the position with which we are dealing) is a necessary by-product of a credit system which will not disappear if the authorisations are revoked. �It can, therefore, be put to one side.�

50 When all is said and done the resolution of this application involves a fine balancing exercise.� On the one side there is the fact that credit payments are all but entrenched in the taxi industry, so much so that drivers cannot really refuse non-cash payments because they now constitute such a large proportion of their income.� On the other hand, the Commission says there is nevertheless some benefit, albeit a small benefit, in making certain that this situation will continue.� Against this there is the potential detriment associated with punishment that must be taken into account.� There is also the fact the authorisations have enabled Cabcharge to become a virtual monopolist at least in relation to the provision of payment systems and, in the view of some, the authorisations no longer work for the benefit of consumers but protect the interests of Cabcharge.� Certainly Consumer Affairs Victoria has expressed this opinion.��

51 In these circumstances, we are of the view that the proper course to take is to revoke the authorisations.� We do not believe that the potential benefit in sustaining them is a sufficiently certain benefit.�

52 The final matter to be dealt with is Cabcharge�s claim for the costs and expenses incurred in answering a summons to produce documents.� The summons was issued by a Tribunal member pursuant to the power conferred by s 105(2).� Neither that provision nor any other provision in the Trade Practices Act provides for the recovery of costs.� In Re John Dee (Export) Pty Ltd (1990) ATPR �41-006Lockhart J said that a power to award costs must exist by implication from the Tribunal�s express power to summon a person to attend or produce documents or is incidental to that express power.� With the greatest of respect, it is unlikely that this is correct.� It is unlikely because the Act does not contemplate that the Tribunal will subject itself to a costs order whenever it exercises its power under s 105(2).� It is true that here Cabcharge submits that its costs be paid not by the Tribunal but by Mr Jools.� However, it is even less likely that one would read into the legislation an implication that if a party to a proceeding before the Tribunal requests it to issue a summons that person renders himself liable to a costs order.�

I certify that the preceding 52 (fifty-two) numbered paragraphs are a true copy of the Ruling herein of the Tribunal.

Associate:

Dated:�� 27 June 2006

Applicant appeared in person.

Counsel for the Australian Competition and Consumer Commission:	J E Stuckey-Clarke

Solicitor for the Australian Competition and Consumer Commission:	Australian Competition and Consumer Commission

Counsel for Cabcharge Australia Limited:	I Wiley

Solicitor for Cabcharge Australia Limited	Cabcharge Australia Limited

Date of Hearing:	20 & 21 March 2006

Date of Determination:	27 June 2006

SCHEDULE

Statement of Agreed Facts by the Applicant and the Networks

In accordance with order 3 of the directions made by the Australian Competition Tribunal (�Tribunal�) on 15 June 2005, the Applicant and Combined Communications Network Ltd (formerly Deluxe Red and Yellow Cabs Co-operative Trading Society Ltd); RSL Ex-Servicemen�s Cabs & Co-operative Members Limited; St George Cabs Co-operative Ltd; Arrow Taxi Services Ltd; Geelong Radio Cabs Co-operative Ltd; Northern Suburban Taxis Ltd; Black Cabs Combined Ltd (formerly Black Cabs and Eastern Group Taxis Co-operative Ltd); West Suburban Taxis Ltd; Legion Cabs (Trading) Co-operative Society Ltd; and Silver Top Taxi Service Ltd (�the Networks�) have agreed to the following facts, for the purposes of these proceedings:

1�� Background to the Taxi Industry

1.1�� Taxis in NSW are �public passenger vehicles� pursuant to the Passenger Transport Act NSW 2000 (with corresponding legislation throughout other States and Territories throughout Australia).� Under the terms of State and Territory legislation taxi operators must be �accredited� to operate taxis.

1.2 Pursuant to legislation in New South Wales, Victoria and South Australia accredited taxi operators in those states must be affiliated with an authorised taxi network or depot (referred to in this statement as �network�).� The legislation requires networks to provide services to taxi operators, taxi drivers and members of the public who utilise these public passenger vehicles.� New South Wales, Victoria and South Australia each have varying requirements in relation to the services required however each network is required to provide radio booking and dispatch services.� Networks are permitted to outsource the provision of radio booking and dispatch services.

1.3 Taxis may be booked by the public by telephone booking (�radio booking�) or by internet booking (�internet booking�) or by hailing a taxi from the street or taxi rank (�street hire�).

1.4 Taxis along with buses, ferries and trains are public passenger vehicles and as such are an integral part of the public transport system.� Uniform and certainty of payment methods in the public transport system are crucial to its efficient operation and an important public benefit.� Generally forms of public transport other than taxis require passengers to purchase pre-paid tickets.

1.5 Most States and Territories throughout Australia have implemented transport subsidy schemes for persons with severe and permanent disabilities.� Persons qualifying under the scheme are provided with a card or voucher from their government to be used as part payment of taxi fares.

1.6 There are a number of possible payment methods which a passenger could use and a taxi driver could accept to pay for the hire of a taxi:

(a) cash;

(b) credit card;

(d) vouchers (including, amongst others, Cabcharge vouchers);

(e) a subsidy card or voucher;

(f) a Cabcharge card; or

(g) a combination of the above methods.

These payment methods can be initially processed by taxi drivers in different ways including manually (for cash, vouchers and blue dockets), electronic card processing systems such as electronic funds transfer point of sale (�EFTPOS�) terminals and �click clack� machines.

1.7�� Taxi drivers or operators may seek to exchange vouchers or dockets for cash or other goods and services at docket exchanges, by deposit with an operator or a person acting on behalf of an operator or by deposit with a network.

2�� The authorisations

2.1 Between 1986 and 1994 each of the Networks obtained an authorisation from the Trade Practices Commission, the predecessor of the ACCC, for conduct in substantially the following terms:

The penalising or suspension from the use of radio booking facilities by one of the Networks or one of the predecessors of the Networks of its members or drivers as a result of the failure by members or drivers to display radio numbers and/or decals of taxi hiring account or other credit systems which have been approved from time to time by the directors and/or failure of those members or drivers to accept those hiring account or other credit systems in satisfaction of fares for any hirings.

2.2 The authorisations cover the refusal by the Networks to supply radio booking facilities for the reason that a member or driver fails to:

(a) display radio numbers and/or decals of taxi hiring account or other credit systems which have been approved from time to time by the Networks; and

(b) accept those hiring account or other credit systems in satisfaction of fares for any hirings.

2.3 The authorisations allow the Networks to require members and drivers to accept payment from members of the public by a payment system approved by the Networks as a condition of obtaining radio booking facilities.� The payment system approved by the Networks was referred to as the Cabcharge Account System and is payment of fares by members of the public by the following means:

(a) Cabcharge Card and vouchers;

(b) American Express Card;

(d) MasterCard;

(e) Bankcard;

(f) Diners Club International Card;

(g) JCB Card;

(h) International Third Party Cards;

(i) Transport Subsidy Scheme Dockets and chip cards issued by State and Territory Governments;

(j) debit cards; and

(k) other means as approved from time to time.

(�Networks payment systems�).

2.4 The authorisations, in so far as they relate to payment systems, are limited to the requirement by the Networks of their members and drivers to accept the Networks payment systems (being the acceptance of the cards and vouchers referred to in paragraph 2.3) in satisfaction of payment of fares.

2.5 The authorisations do not specify or provide statutory immunity for conduct that requires members or drivers of the Networks to process the cards and vouchers referred to in paragraph 2.3 in any particular manner.

2.6 The authorisations do not specify or provide statutory immunity for conduct that requires members or drivers of the Networks to install or use particular types of electronic credit or debit processing services (including EFTPOS terminals) from a third party as a condition of obtaining radio booking facilities from the Networks.

2.7 The authorisations do not specify or provide statutory immunity for conduct that requires Network members or drivers to only accept the Network payment systems.

3�� The determination

3.1 In December 2003 and May 2004, the ACCC issued notices indicating that it was considering the revocation of the authorisations.

3.2 On 11 March 2005, after seeking and receiving submissions in relation to whether or not the authorisations should be revoked, the ACCC published a determination in which it concluded that it would not revoke the authorisations (�the Determination�).

3.3 On 1 April 2005, the Applicant filed an Application with the Tribunal for review of the Determination.� The Applicant filed an Amended Application on 8 June 2005.

4�� Matters arising out of the authorisations

4.1 The display of decals specifying the Networks payment system allows a member of the public hiring a taxi which is affiliated with one of the Networks to identify what payment methods will be made available to him/her.

4.2 The acceptance of the Networks payment systems by all members and drivers of the Networks means that members of the public can be certain that the Networks payment systems will be available to them, when hiring a Network taxi subject to any terms and conditions (to the extent that they exist).

4.3 The acceptance of the Network payment systems by all members and drivers of the Networks allows a member of the public hiring a taxi affiliated to a Network to choose his/her preferred method of payment when hiring that taxi.

4.4 The acceptance of the Network payment systems by all Network members and drivers means that Network members and drivers must accept transport subsidy scheme dockets as part payment for the hirings by disabled persons.

4.5 The acceptance of the Network payment systems by all Network members and drivers means that Network members and drivers cannot refuse hirings of disabled persons on the basis that they do not accept transport subsidy scheme dockets.

Dated:� 25 July 2005