news The national competition regulator has taken a dim view of the proposed ‘ihail’ taxi booking app, issuing a draft determination today that would see the centralised booking system for taxis Australia-wide blocked on competition grounds.
The app is being proposed by the taxi industry as a whole. It would initially operate in major metropolitan and regional centres across Australia and some cities overseas, providing passengers with a single taxi booking platform and access to the closest available taxi in their area from participating networks, regardless of which taxi network the driver belongs to.
The initial members of the joint venture behind the app include Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge. As well as providing in-taxi payment terminals to most taxis in Australia, Cabcharge also operates taxi networks in Sydney, Melbourne, Adelaide and Brisbane. ihail advises that each of these members will also continue to operate their own booking apps.
The app would compete directly with third-party booking apps such as GoCatch, Ingogo and Uber.
In a statement released this morning, Australian Competition and Consumer Commission chair Rod Sims said the regulator believes the app would have a “significant impact” on competition in the taxi industry.
“The ACCC accepts this app would provide a more convenient way for consumers to book taxi services, but in the draft determination the ACCC takes the view that this comes at too big a cost to competition,” said Sims.
“The ACCC estimates that the initial ihail shareholders represent more than half of all taxis in Australia, and a larger share in the metropolitan areas where the app would operate,” Mr Sims said. “This would guarantee that from its launch, the ihail app would have a larger fleet of taxis, in a broader range of locations, than any existing taxi booking apps. Depending on the rate of take up of the ihail app amongst other taxi networks, it could potentially grow to include all taxi networks in any area.”
“There are a number of apps that already provide access to large fleets of taxis across multiple locations. The growth in these existing apps is being driven by competition to attract drivers and customers. ihail will achieve a potentially dominant position from launch – not through competition, but because of the larger fleet of taxis its ownership structure delivers.”
Sims said the app was likely to reduce competition, and the cooperative arrangements between the tax companies “may tip the market towards ihail becoming the dominant booking app”.
“If it becomes the dominant booking app, it may also reduce competition by impacting the commercial viability of existing apps operated by individual taxi networks, as well as those operated by third parties such as goCatch and ingogo.”
Passengers will only be able to pay for fares booked with ihail through the app (passengers will not be able to pay in the taxi) and Cabcharge will process all payments.
“The ACCC is concerned that this requirement will shut out opportunities for Cabcharge’s competitors to provide non-cash payment processing services to ihail customers, and that this would significantly reduce competition between taxi payment processing providers more generally because emerging providers would have a reduced customer base that they could compete to supply,” Sims said.
The proposal also allows passengers to offer to pay an extra amount above the metered fare at the time of requesting a taxi. This is designed to encourage drivers to accept their booking over other fare requests.
“The ACCC is concerned that the upfront priority dispatch payment could reduce access to taxis during peak periods for financially disadvantaged sections of the community,” Sims said.
The ACCC is now seeking submissions from ihail Pty Ltd and interested parties in relation to its draft determination, before making a final decision in November/December 2015.
The ACCC has a point here … the ihail app, given the number of taxi companies backing it, does have the potential to become something of a giant, almost monopolistic player.
However, personally I don’t have a problem with the taxi industry creating and using this type of app. The third-party booking apps — such as GoCatch, Ingogo and Uber — have constantly called for regulation to be removed in the personal transportation industry. I would rather see that trend continue and the sector continue to be deregulated, rather than see the ACCC try and restrain the incumbent players in this fashion. Ultimately, in a freer market, the better players will come out on top because they provide a better service — without the ACCC intervening to artificially regulate the market.
I think the personal transportation industry is in a very fluid state at the moment. I suspect the best approach would be for governments to step aside for a bit and see what happens, as the various players in the market fight it out. The end result may be a better situation than the ACCC would suspect.