The State Government has started legal action against six drivers and five hire car operators who have been taking bookings from the taxi competitor Uber, InDaily can reveal.

The 11 South Australian-based Uber partners have received legal “please explain” letters from the Government’s Accreditation and Licensing Centre for the taxi and hire car industry.

A Government spokesman told InDaily the drivers and operators had been asked to “provide detailed information ahead of referral to the Passenger Transport Standards Committee for investigation”.

The spokesperson said the drivers and operators could then face penalties for breaches of the Passenger Transport Act.

“Pending the outcome of the PTSC’s deliberations, drivers and operators face possible financial penalties of up to $5,000, or loss/suspension of accreditation,” he said.

“Financial penalties can increase to $8,000 for drivers and $30,000 for operators should the matter proceed to court.”

Uber Australia said it was disappointed that the Government was “harassing” accredited drivers – and vowed to stand by the drivers and operators.

Uber is an app-based service which allows customers to book accredited hire cars for trips.The service has been threatened with legal action by the Government since it first set up in Adelaide last month.

While Uber says it uses only accredited hire car drivers in SA, the Government says the service is in breach of SA legislation because Uber itself has not been accredited as a booking agency.

News of the Government’s action comes one day after a federal review of competition in Australia recommended a loosening of restrictions in the taxi industry which were increasing costs for consumers.

A draft report by Ian Harper, who is undertaking the biggest review of competition policy in two decades, concluded that regulations limiting the number of taxi licences and preventing other services from competing with taxis had raised costs for consumers and hindered new transport services from emerging.

“States and territories should remove regulations that restrict competition in the taxi industry, including from services that compete with taxis, except where it would not be in the public interest,” the report said.

The final report is due by the end of the year.

Transport Minister Stephen Mullighan told InDaily: “In principle, we have no issue with competition in the taxi industry, but regulation is important to ensure passenger and driver safety, and vehicle and service standards.”

Uber Australia’s general manager David Rohrsheim said Uber would stand by its partner drivers and operators.

“We find it disappointing that the SA Government is using taxpayer money to harass licensed, accredited hire car drivers,” he told InDaily.

“We will absolutely stand by our partners if they encounter any problems using Uber’s technology to grow their business and support their families.”

“States that attempt to protect the taxi industry from innovation have today been slammed in the federal government’s draft competition policy review report.”