Convenience loses out to competition – ACCC block ihail app

Anthony Caruana
12 October, 2015
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In a draft ruling, the ACCC has blocked a joint venture arrangement between Australian and international taxi networks and other participants in the taxi industry to launch and operate a new smartphone taxi booking app. The initial members of the joint venture included Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge.

The iHail app would initially operate in major metropolitan and regional centres across Australia and some cities overseas.  It would provide 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 ACCC considers that the iHail app would have a significant impact on competition in the taxi industry, which could impact prices and quality of service,” ACCC chairman Rod Sims said.

“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.”

Opinion

I understand the ACCC’s reticence to stifle competition. Really, I do. But the taxi industry is facing significant disruption. Lyft, Uber and other ridesharing services are just the beginning. Pay close attention to Elon Musk and Tesla. Do you think all the work they’re doing on the technology of cars is only about energy efficiency? Tesla is playing a long game where driverless cars will become part of a car sharing system that will allow groups of people to share cars easily.

That’s a massive threat to taxi services.

Sims also says, “The ACCC considers that the proposed arrangements are likely to produce significant public detriments. They will reduce competition between taxi networks in supplying services using the iHail app and, the arrangements may tip the market towards iHail becoming the dominant booking app.”

This is a crystal clear sign that the ACCC doesn’t get it. iHail may cause an impact within the taxi industry. But the broader market, which is about passengers seeking someone to pick them up and drive them to another location, is really the issue.

And, in that broader market, taxis are just one player.

In my view, the ACCC has made it harder for the taxi industry to compete.

Disruption in a market happens through one significant mechanism – the use of technology to reduce friction between the customer and service provider. The ACCC’s decision maintains friction in the interaction between taxis and passengers, thus handing a golden ticket to the ride sharing services.

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