Part D – Understanding and improving industry performance (PDF ...

The ESC reminded the inquiry of its commentary in the
2007/08 taxi fare review:
This preferred position reinforces Cabcharge’s
dominance in the provision of in-vehicle electronic
payment processing services for the industry.
In consequence of this preferential position,
Cabcharge is able to obtain a 10% fee for each
credit card transaction… Options should be
explored for introducing a greater degree of
competition in the provision of taxi-cab credit
card transaction systems. 14
In December 2011, the Cabcharge contract was
extended for two years with a provision allowing
termination of the contract ‘for convenience’ with three
months notice.
The inquiry also notes that the Victorian Government has
not provided an effective opportunity for other industry
players to compete with Cabcharge. In particular, it has
not defined a set of service requirements and equipment
standards for the MPTP terminal and associated
data collection services. Industry participants have
expressed concerns to the inquiry that access to these
specifications is vital for increased competition in the
payment systems market.
State approval of EFTPOS devices
Currently, the Transport (Taxi-Cabs) Regulations 2005
require an EFTPOS terminal to be tailored specifically for
use within the taxi industry 15 and impose a requirement
for these terminals to be submitted to the licensing
authority for type approval 16 . In assessing an application
for approval, the VTD considers (amongst other things):
• Whether the payment device has been certified by
the Australian Payments Clearing Association
• That only one other payment device is permitted in
the cab (in addition to the MPTP terminal). 17
The device must also generate an electronic receipt that
is fully compliant with the receipt specified in regulation.
The inquiry considers that most of the requirements either
replicate other finance and transport industry regulations
or are overly prescriptive and unnecessary. For example,
regulation should not need to define which device
produces a receipt, only that a receipt must be produced.
No other taxi regulator in Australia requires the approval
of EFTPOS devices. The criteria have effectively
limited the number of EFTPOS providers participating
in the market and have supported the need for the
‘intermediary’ payment system between normal EFTPOS
providers and taxi operators. As such, the inquiry
considers that the requirements further entrench the
practice of excessive surcharging for electronic payment
of taxi fares.
Commercial barriers
As discussed above, markets for payment instruments
and processing are characterised by strong network
effects. Cabcharge has been able to take advantage of
these network effects by tying its branded cards to its
processing facilities; that is, only Cabcharge EFTPOS
terminals are permitted to process Cabcharge cards.
Cabcharge has not given other payment providers access
to process Cabcharge’s own cards and vouchers. As
Cabcharge cards are the most widely used payment
instrument, and the only significant taxi-specific payment
instrument, a taxi operator that does not have the ability
to process these cards will be seriously disadvantaged.
This means that alternative processors face a significant
barrier to establishing a market presence. Market inquiries
indicate that Cabcharge branded charge account cards
and eTickets account for up to 40 per cent of non-cash
transactions in the taxi industry. 18 This was a key issue that
the Australian Competition and Consumer Commission
(ACCC) sought to address in ACCC v Cabcharge Australia
Ltd [2010] FCA 1261 (see case study).
Despite the findings and orders of the Federal Court,
third party non-cash payment processing systems are
still unable to accept Cabcharge branded charge cards,
dockets and eTickets. They are limited to the processing
of third party charge cards or bank issued credit cards.
14 ESC, Submission to the Taxi Industry Inquiry, SS151, p.38
15 Regulation 43(7) Transport (Taxi-Cabs) Regulations 2005 requires a
specific form of receipt to be provided
16 Regulation 13A Transport (Taxi-Cabs) Regulations 2005
17 These two criteria are operational policies of the VTD
18 See, for example, Cabcharge Australia Limited, Results Presentation,
Year Ended 31 December 2011, ASX website accessed on 29 March
2012 at: http://member.afraccess.com/media?id=CMN://2A668116&f
ilename=20120223/CAB_01271356.pdf
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