Final orders have now been made in Australian Competition and Consumer Commission v Cabcharge Australia Ltd (here) whereby the Federal Court ordered Cabcharge to pay $15 million in penalties and costs for three contraventions of section 46 of the Trade Practices Act 1974. Unfortunately the Judge’s reasons have not been published yet. [Now published here].

Although the penalties were jointly submitted as agreed, the matter was hard fought as can be seen from Cabcharge’s media release.

Two contraventions related to a refusal by Cabcharge to allow competing suppliers of electronic payment processing services for taxis to process Cabcharge branded non-cash payment products. The third contravention related to the below cost supply of Cabcharge taxi meters and associated fare schedule updates for an anti-competitive purpose.

Justice Finkelstein made declarations for each of three contraventions of section 46(1) of the Trade Practices Act 1974 admitted by Cabcharge and ordered that Cabcharge pay a pecuniary penalty of $14 million for the contraventions, allocated as follows:

• $9 million in relation to Cabcharge’s refusal to deal with Mpos Australia Pty Ltd in 2008;
• $2 million in relation to Cabcharge’s refusal to deal with Travel Tab Australia Pty Ltd in 2005; and
• $3 million in relation to Cabcharge’s supply of taxi meters and fare schedule updates below cost between 2004 and 2007.

The court also made orders requiring Cabcharge to pay a contribution of $1 million towards the ACCC’s costs and to implement a trade practices corporate compliance program.

UPDATE: It is worth setting out the factors that Justice Finkelstein placed the most reliance on.

“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.

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

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.

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.

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.

Sixth, although Cabcharge was not conscious that it was breaching s 46 of the Act, its conduct was deliberate. As the Full Court said in Universal Music Australia Pty Ltd v Australian Competition and Consumer Commission [2003] FCAFC 193; (2003) 131 FCR 529, [310]: “If a company ‘takes the odds’, it must expect serious consequences if it miscalculates”.

Seventh, Cabcharge’s most senior employees and management participated in the contravening conduct, including Cabcharge’s Executive Chairman and CEO (Mr Kermode), CFO and Director (Mr Barukh, who resigned in 2007) and Company Secretary and Corporate Counsel (Ms Doyle).

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.

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. “