In a recent decision at the Federal Court, Black & White Cabs Pty Ltd (Black & White Cabs) was ordered to pay $110,000 in penalties for breach of the third line forcing prohibitions of the Trade Practices Act 1974 (TPA).
Third line forcing is a form of exclusive dealing and can broadly be defined as:
- the supply of goods or services on the condition that the purchaser also buys goods or services from a particular third party; or
- a refusal to supply goods because the purchaser will not agree to that condition.
Third line forcing is prohibited under section 47 of the TPA. Unlike other forms of exclusive dealing, a breach does not depend on whether it is for the purpose or has the effect of lessening competition in a market.
Significantly, whilst third line forcing is banned outright, it will not breach the TPA if it successfully notified to the Australian Competition and Consumer Commission (ACCC). The TPA prescribes a formal notification procedure.
In this case, Black & White Cabs had signed lease agreements with its taxi operators which contained a clause requiring its taxi operators to exclusively use Cabcharge Australia's Payment System when processing electronic payments.
The ACCC asserted that the above arrangement constituted third line forcing because the use of the Cabcharge Payment System was tied with the sub-lease of the taxis. Black & White Cab's taxi operators were not provided with a choice of payment processors.
Black & White Cabs admitted that its conduct had contravened section 47 of the TPA. In addition to the fine, Black & White Cabs was ordered by the Court to:
- implement a trade practices compliance program;
- pay an additional $10,000 towards the ACCC's costs; and
- send letters to all of its affiliated taxi operators regarding its unlawful conduct.
These proceedings are a useful reminder of:
- the significance of complying with the TPA; and
- the importance of notifying third line forcing conduct with the ACCC.