Australian Competition and Consumer Commission v Black & White Cabs Pty Ltd [2010] FCA 1399 (14 December 2010)

Last Updated: 15 December 2010

FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Black & White Cabs Pty Ltd [2010] FCA 1399

Citation:		Australian Competition and Consumer Commission v Black & White Cabs Pty Ltd [2010] FCA 1399
Parties:		AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v BLACK & WHITE CABS PTY LTD
File number:		VID 650 of 2010
Judge:		FINKELSTEIN J
Date of judgment:		14 December 2010
Catchwords:		TRADE PRACTICES – exclusive dealing – third line forcing – contravention admitted – appropriate penalty to be imposed – appropriate form of trade practices compliance and education program
Legislation:		Trade Practices Act 1974 (Cth), ss 47(1), 47(6), 76
Cases cited:		Foster v Australian Competition and Consumer Commission [2006] FCAFC 21; (2006) ATPR 42-105 ICI Australia Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248 NW Frozen Foods v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993 NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission [1996] FCA 1134; (1996) 71 FCR 285 Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 363; (1985) 4 FCR 296 Trade Practices Commission v CSR Ltd [1991] ATPR 41-076
Date of hearing:	3 November 2010
Place:	Melbourne
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	15
Counsel for the Applicant:	D Star
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	J Daniels
Solicitor for the Respondent:	Middletons

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 650 of 2010

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	BLACK & WHITE CABS PTY LTD Respondent

JUDGE:	FINKELSTEIN J
DATE OF ORDER:	3 NOVEMBER 2010
WHERE MADE:	MELBOURNE

THE COURT DECLARES THAT:

1. The Respondent, Black and White Cabs Pty Ltd (B&W Cabs), in the period 1 May 2009 to 20 July 2009 (Relevant Period), engaged in the practice of exclusive dealing as described in section 47(6) of the Act in contravention of section 47(1) of the Trade Practices Act 1974 (Cth) (the Act), by offering to supply and supplying to taxi operators:

1.1. taxi network services; and

1.2. the right to use taxi service licences held by B&W Cabs,

on the condition that the taxi operators would acquire electronic payment services directly or indirectly from Cabcharge Australia Ltd (Cabcharge), a company unrelated to B&W Cabs.

THE COURT ORDERS THAT:

2. B&W Cabs be restrained for a period of five years from the date of these orders, whether by itself or its servants or agents or otherwise howsoever from supplying, or offering to supply, in any manner whatsoever taxi booking, dispatch or other services (including the right to use taxi service licences) to accredited operators of taxi services on the condition that the accredited operators of taxi services will acquire other goods and/or services, including electronic payment services, from any third party unrelated to B&W Cabs, including Cabcharge.
3. B&W Cabs:

3.1. establish the Trade Practices Compliance and Education/Training Program (the Program) set out in Annexure 1:

3.1.1. for Directors, officers and senior managers of B&W Cabs’ business, being a program designed to ensure their awareness of the responsibilities and obligations in relation to the conduct declared by the Court in this proceeding to be in contravention of section 47(1) of the Act, and any similar conduct or related conduct;

3.1.2. revising the internal operations of its business which led it to engaging in the conduct declared by this Court in this proceeding to be in contravention of section 47(1) of the Act;

3.2. maintain and administer, at its own expense, the Program for a period of 3 years; and

3.3. provide, at its own expense, a copy of any document to be provided to the Applicant pursuant to the Program.

4. B&W Cabs, within 30 days of the date of the making of this order, cause a letter in the form set out in Annexure 2 to be delivered to all accredited operators of taxi services who, during the Relevant Period, acquired from B&W Cabs any of the services described in the injunction set out at paragraph 2 of these orders.
5. B&W Cabs, pursuant to section 76 of the Act, pay to the Commonwealth a penalty in the amount of $110,000 in respect of the conduct referred to in the declaration at paragraph 1 above, payable in instalments as follows:

5.1. $30,000 within 28 days of the making of this Order;

5.2. $40,000 within 1 year of the making of this Order; and

5.3. $40,000 within 2 years of the making of this Order.

6. B&W Cabs file and serve on the ACCC within 60 days of the making of this order an affidavit by its proper officer verifying that it has carried out its obligations referred to in paragraph 4 above, detailing what it has done and providing a copy of one of the letters sent.
7. B&W Cabs pay a contribution of $10,000 to the ACCC’s costs, within 28 days of the making of this Order.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 650 of 2010

BETWEEN:	AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant
AND:	BLACK & WHITE CABS PTY LTD Respondent

JUDGE:	FINKELSTEIN J
DATE:	14 DECEMBER 2010
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

Introduction

1. The respondent, Black & White Cabs Pty Ltd (B&W Cabs), provides booking, dispatch and other services to accredited operators of taxi services (“network services”) and also permits operators to use taxi service licences it manages (“taxi licence services”). B&W Cabs provides network services to approximately 1000 taxis and manages around 250 taxi licences. The applicant, the Australian Competition and Consumer Commission (ACCC) contends that in the course of providing its services B&W Cabs contravened s 47(1) of the Trade Practices Act 1974 (Cth) (the exclusive dealing prohibition) by engaging in third line forcing. Section 47(6) expressly states that third line forcing is a form of exclusive dealing. The ACCC seeks declarations of contravention, injunctions, the establishment of a trade practices compliance and education/training program, pecuniary penalties, an order that B&W Cabs write to all accredited operators of taxi services to inform them of B&W Cabs’ contravention and the orders that will be made and costs. B&W Cabs concedes that it has contravened s 47(1) and that the relief sought is appropriate. It remains for me to decide whether the relief should be granted.

Contravening conduct

2. In a nutshell, the ACCC’s case is that B&W Cabs engaged in third line forcing by requiring a number of operators to acquire services from Cabcharge Australia Ltd, an unrelated company. It is necessary to say a little about Cabcharge’s business. Cabcharge provides three relevant products and services. First, it provides a charge account system, which gives customers a line of credit to pay for taxi fares and related charges. Taxi fares and charges are paid for using Cabcharge instruments, such as Cabcharge credit cards,
   e-tickets and paper vouchers. Second, it provides a payment system, which allows drivers to process Cabcharge instruments and other non-cash payment systems (eg credit and debit cards). Cabcharge’s processing system uses EFTPOS terminals, equipment and computer infrastructure supplied by Cabcharge. Third, it provides processing services, which facilitate the payment to taxi drivers and operators of amounts in respect of taxi fares and related charges paid by passengers using Cabcharge’s payment system.
3. In 1999 B&W Cabs entered into a contract with Cabcharge in relation to the use of Cabcharge’s payment systems. The contract included a term that Cabcharge provide a merchant facility to B&W Cabs which would permit it, its operators and drivers to offer the Cabcharge payment system and to accept approved payment cards and Cabcharge instruments from hirers of taxis (cl 3.1). As part of the agreement, Cabcharge agreed to pay B&W Cabs 2.5% of the GST inclusive amount of all taxi fares processed using Cabcharge’s payment system.
4. Prior to April 2009 B&W Cabs provided network services and taxi licence services on the basis of a standard form contract. In about April 2009 B&W Cabs revised the terms of its standard form contract. The new contract was offered to 14 operators in respect of 24 taxis. Clause 15.3 of the contract provided that:

(a) Black & White Cabs has an approved electronic payment system being the Cabcharge Eftpos System or such other system which may be approved by Black & White Cabs from time to time.
(b) The Operator must use the approved electronic payment system exclusively during the term of this Agreement.

5. In other words, it was a condition of the offers made by B&W Cabs to provide network services and taxi licence services that the operators acquire services supplied by Cabcharge. This conduct amounts to third line forcing.

The suggested orders

6. Declarations of contravention serve the public interest by marking the court’s disapproval of a party’s conduct and vindicating the applicant’s claims. In light of the evidence, I will make the declarations sought.
7. The parties have suggested that B&W Cabs pay a pecuniary penalty of $110,000. The maximum penalty at the time of the contravention was the higher of $10 million, three times the total value of the benefit that was obtained and was reasonably attributable to the conduct and, where the benefit cannot be determined, 10% of the corporation’s annual turnover during the turnover period: s 76. It is impossible to calculate the total benefit obtained by B&W Cabs by reason of the contravention, although it is likely to be minimal. 10% of B&W Cabs’ turnover is around $1.3 million. Therefore the maximum penalty is $10 million.
8. The principles concerning the imposition of penalties are well known: see eg Trade Practices Commission v Mobil Oil Australia Ltd [1984] FCA 363; (1985) 4 FCR 296; 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. Notably, when the parties are agreed on the quantum of the penalty the court’s role is to determine whether the agreed penalty is within the permissible range: NW Frozen Foods v Mobil Oil Australia Pty Ltd [2004] FCAFC 72; (2004) ATPR 41-993.
9. I will briefly outline the factors that, in this case, are the most important when assessing the appropriate level of penalty. I will start with the aggravating factors. First, the contravening conduct involved B&W Cabs’ managing director, Mr Webb. Second, there was no formal trade practices compliance procedure or policy in place.
10. Next, I outline the mitigating factors. First, the conduct occurred over a relatively isolated time period (less than three months) and only affected 14 of B&W Cabs’ 400-odd operators and 24 of its 1000-odd taxis. Second, one operator requested a copy of the contract without cl 15.3 so that he could operate a second EFTPOS terminal and B&W Cabs obliged. This perhaps demonstrates that B&W Cabs either did not intend to engage in third line forcing or did not intend to aggressively enforce the clause. Third, immediately following the ACCC informing B&W Cabs that it was being investigated because of complaints that it had engaged in third line forcing, B&W Cabs took immediate action by (1) revising its standard contract; (2) informing all operators who had signed it that B&W Cabs did not intend to enforce cl 15.3; and (3) provided to each of the 14 relevant operators a revised form of the standard contract with cl 15.3 removed. Fourth, B&W Cabs has not previously been found to have contravened the Act. Fifth, B&W Cabs compromised the proceeding at a very early stage, before either party had filed any evidence. In fact, it was B&W Cabs which sought the mediation that led to the parties agreeing to compromise the proceeding.
11. In terms of the parity principle (that like cases should be treated alike), there have been no penalties imposed for third line forcing under the post-1993 penalty regime. The pre-1993 cases were under a penalty regime very different to the present. There is, therefore, little assistance gained by considering the case law. Nonetheless, having regard to the “sentencing” factors that I have identified I am satisfied that $110,000 is an appropriate penalty.
12. In addition to a pecuniary penalty, what is sought is an injunction that B&W Cabs be restrained for a period of five years from the date of these orders from supplying or offering to supply network and taxi licence services on the condition that operators acquire other goods and services from any third party unrelated to B&W Cabs, including Cabcharge. Injunctions provide specific deterrence from engaging in further contravening conduct by attaching the sanctions available for contempt: ICI Australia Pty Ltd v Trade Practices Commission [1992] FCA 474; (1992) 38 FCR 248. Although the injunction sought is wider than the contravening conduct, there is no doubt that the court has power to make a wider order: Foster v Australian Competition and Consumer Commission [2006] FCAFC 21; (2006) ATPR 42-105. I will grant the injunction sought.
13. The parties also seek an order that B&W Cabs write to all accredited operators who acquired services from B&W Cabs during the relevant period to inform them of B&W Cabs’ contravention and the orders that will be made. I am prepared to make the order.
14. B&W Cabs has agreed to establish a compliance and education/training program. These programs have become a staple consequence of breaching the Act. At the hearing I expressed some reservations about the effectiveness of in-house compliance programs. Generally, as is the case here, the contravening party appoints a compliance officer from within the company and an external compliance trainer is brought in to oversee the process. The obvious object is to ensure that directors and senior managers understand the responsibilities, obligations and consequences of breaching the Act. I floated the idea that the ACCC might consider taking a more active role in compliance programs, for example by running its own training and education sessions or having an officer attend in-house programs. In-house compliance programs embody a risk that compliance trainers will lack rigour in their approach or will go easy on employees who do not show up to the training sessions. By contrast an ACCC-conducted training session or one in which its officers are involved is likely to be better attended and taken more seriously. Still, until this topic is given closer consideration I should approve the compliance program agreed by the parties.
15. Finally, there is the question of costs. B&W Cabs has agreed to make a $10,000 contribution towards the ACCC’s costs. There will be an order to that effect.
    

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated: 14 December 2010