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Cabcharge accused of bullying its competitors

August 4, 2010

http://www.smh.com.au/national/cabcharge-accused-of-bullying-its-competitors-20100728-10w2v.html

Australia has a national payment system for taxis run by a company called Cabcharge.  Consumers use Cabcharge cards, which look like electronic bus tickets, to pay a taxi fare.  The cards are especially popular with employers as an easy way of providing fare payments for employees on business travel. There are other companies that offer similar services in Australia, but Cabcharge is the dominant player with $450 million annual business.

To break this dominant position, new payment systems, particularly Live Payments and the Transport Australia Xpress System, have been developed to compete.  These players recently accused Cabcharge of trying to keep them out of the market as they prepared to launch their products.  “Tom Varga, chief executive of Live Payments, said Cabcharge-owned taxi networks – which in Sydney include Taxis Combined, Silver Service and Yellow Cabs – had refused to allow their drivers to use his firm’s terminals despite a 2006 ruling by the competition regulator designed to break Cabcharge’s monopoly over the electronic taxi payments system.” “Almost all of Sydney’s 20,000 taxis are fitted with Cabcharge terminals, while about 25 per cent contain secondary terminals.”

The Australian Competition and Consumer Commission (ACCC) is pursuing Cabcharge in the Federal Court over alleged anti-competitive behaviour and is being supported in this effort by the firms’ competitors.

  1. What does Cabcharge have a ‘monopoly’ over?
  2. How is Cabcharge able to erect ‘barriers to entry’ to maintain its dominant market position?
  3. How are Cabcharge’s competitors seeking to break its monopoly?
  4. Why is the government trying to break the monopoly?  Why not just let the ‘free market’ work itself out?
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