Australia's consumer watchdog says it will block a taxi-hailing smartphone app proposal from major taxi companies because it would reduce competition and "produce significant public detriments".
Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge submitted plans for the 'ihail' app to the Australian Competition and Consumer Commission in May. Together, the companies make up more than 50 per cent of all cabs in Australia, but significantly more of the market in major cities.
ACCC chairman Rod Sims said while convenient for consumers, the app — largely designed to compete with Uber and other app-based taxi industry disruptors — would in the long run have a "significant impact on competition in the taxi industry", with the potential to drive up prices and reduce service quality.
The app would give ihail a potentially dominant position from launch – not through competition, but because of the larger fleet of taxis its ownership structure delivers, Mr Sims said. Passengers would be able to to locate and book a cab regardless of which network they were on, similar to apps goCatch and ingogo.
Mr Sims raised concerns the potential dominance of ihail would squeeze out these existing start-ups.
Chief operating officer for ihail Nick Kings said ihail was working closely with the ACCC and expected a positive final decision from the watchdog following some amendments to the proposed app.
"We don't see this as the end of the road, just a speed hump," Mr Kings said.
While he declined to go into detail, Mr Kings said offering customers the potential to select between taxi brands to promote competition between its members was one possible amendment on the table.
Both ingogo and goCatch, and controversial ride-sharing service Uber, all welcomed the ACCC's draft decision.
Chief executive for ingogo Hamish Petrie said ihail would potentially return Australia to the "bad days" of a Cabcharge monopoly on taxi payment processing.
"The proposal by ihail would see all payments processed through Cabcharge and a potential return to the monopoly that existed for so long, something recognised by the ACCC as not being in the best interests of the taxi-travelling public," Mr Petrie said.
Cabcharge, which runs taxi payment services and would have provided the payment gateway for ihail, said the ACCC decision would not impact Cabcharge's own apps and payments services. Cabcharge has about a 10 per cent holding in ihail.
Chief executive for goCatch Ned Moorfield said ihail was a threat to competition because in some major cities such as Sydney, Melbourne and Adelaide, its members represented "something in the vicinity of 70 per cent of taxis on the road".
"We'd see the next major competitor to Cabcharge networks, being Silver Top, joining in on the grouping — so that's going to concentrate a lot of market power into that one offering," Mr Moorfield said.
It was "pretty clear" ihail was an attempt by Cabcharge and other incumbents to catch up with the app economy, he said.
However, former ACCC chairman professor Allan Fels, who led a Victorian government review into the taxi industry, said Australian governments needed to take a more liberal approach to regulating the pre-booked taxi industry.
Unlike goCatch or Uber, ihail planned to allow passengers to book a cab at a future time, as well as finding one nearby in real time through GPS services.
The ACCC also took issue with ihail's proposal to allow users to tip a driver upfront to give their booking priority over others. Mr Sims said a tip function could reduce taxi access for financially disadvantaged people during peak periods of taxi use. However, goCatch and ingogo already have a priority tipping service.
"We've had a conversation with the ACCC about that and unfortunately it's their view that they don't have the power to currently deal with that issue," ihail's Mr King said.
Uber has been at loggerheads with the taxi industry and Australian regulatory and legal authorities since arriving in Australia.
Submissions are now open on the decision , with the ACCC expected to hand down its final decision on the proposed app the end of the year.
Silver Top Taxi was contacted for comment.
