In 2010 Cabcharge was fined $15 million dollars for predatory pricing to stifle competition. As I understand it, the complaint was due to the company charging a high fee for “free-loading” (as they saw it) competitors use of the advanced payment system they had developed at considerable expense. The ACCC argued that the payment system was infrastructure for which competitors need only pay a nominal fee.
Cabcharge accepts payment with any credit card. Paying with cash avoids the surcharge.
Cabcharge has formed associations with the taxi network Yellow Cabs, and more recently the bus operator ComfortDelGro, regarded by the Inquiry as examples of anti-competitive vertical integration. Both parties however see mutual benefits in their relationships. It is worth noting that other non aligned taxi operators have chosen the advanced Cabcharge payment system on merit. As a result the company has achieved 97% penetration of the taxi market,
Cabcharge returns surplus revenue to the taxi industry, to improve driver education, and taxi standards.
What is the rationale for lowering the 10% surcharge to 5%
Why is 10% just too much. Are present company profits excessive? Salient features of the 2012 profit report:
Total revenue $192.4m, up 4.2% with $90m derived from members taxi related services
Net profit after tax $60m, with 28% of group profit before one-offs, derived from Associates.
Full year dividend payments are 35 cents/share, fully franked a yield of about 8.5%.
These are financially good results, but hardly excessive. Bear in mind that many shareholders may have lost as much as 50% of their capital investment in holding Cabcharge shares. It is mean-spirited to begrudge share-holders a reasonable dividend return. This is the cost of capital. Better taxis and drivers come at a price.
In her presentation Geraldine Doogue quoted a 25% dissatisfaction rate with the taxi industry. This may seem high, but conversely it can be considered that the satisfaction rate is of the order of 75%.
Many of the complaints emanate from inability to procure taxis at night, not the standard of service. Solo owner drivers chosing convenient working hours are unlikely to correct this problem. There is also greater risk to their safety at night, and non-payment more likely. It is the taxi networks who are best positioned to respond to this need.
I consider the standard of our taxi service compares favourably with other forms of transport.
Cabcharge and the Chairman Reg Kermode have been unfairly maligned. It is my opinion that Reg Kermode deserves credit for doing much to improve the taxi industry. Cabcharge has established a model for private enterprise involvement. It has, and will continue to help provide safer taxis, more helpful drivers, more responsive booking arrangements, in addition to their flexible documented and honest payment system.
We need a financially viable, high quality taxi industry. This can be achieved through private enterprise, and hard work. The industry does not need more burdensome regulation.
Everyday Australians want to see a fair go for all participants, including Cabcharge.
Categories: Community Issues
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