Monday, 12 October 2015 10:13

Taxi industry fail as ACCC proposes to deny ihail booking app Featured

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Large icy chunks are falling on the taxi industry’s ihail app courtesy of the ACCC, which considers the ihail app would have a ‘significant impact on competition’.

The rain is Spain may well fall mainly on the plain, but the taxi industry’s ihail app is being hailed upon into oblivion by the powers from up on high at the ACCC, the Australian Competition and Consumer Commission.

The ACCC is proposing to deny authorisation to ihail Pty Ltd (ihail) in a draft determination which appears to determine that ihail would be uncompetitive, although no final decision is due until November or December 2015.

ihail Ptd Lty would, according to the ACCC, set up ‘joint venture arrangements between Australian and international taxi networks and other participants in the taxi industry to launch and operate a new smartphone taxi booking app.’

The ACCC then explains that, if the app were launch, it would ‘initially operate in major metropolitan and regional centres across Australia and some cities overseas,’ and ‘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 initial members of the joint venture would include ‘Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge.’

Like some of the other taxi app players out there (which includes GoCatch and Ingogo), ihail would provide in-taxi payment terminals to most taxis in Australia, and ihail ‘advises that each of these members will also continue to operate their own booking apps.’

ACCC Chairman Rod Sims said: “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.

“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.

“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.

“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.

“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.

“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,” explained Chairman Sims.

The ACCC notes that ‘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,’ which to me, sounds as inconvenient as Uber and removes the excellent flexibility to pay the way you want as with GoCatch and Ingogo.

ACCC Chairman Rod Sims continues: “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.”

The ACCC tells us that’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,” which does sound like it could be a good thing as with the GoCatch app.

However Rod Sims stated: “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.”

Now, it’s not all completely game over for ihail Pty Ltd - the ACCC says it is now ‘now seeking submissions from ihail Pty Ltd and interested parties in relation to its draft determination,’ but hey, unless ihail can pull a miracle out of the magician’s hat, one can only suspect we already know what the ACCC’s final decision might be come November/December 2015.

Further information, including a copy of the draft decision, is available from the ACCC’s Public Register.

The ACCC notes that ‘Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act (2010),’ and that ‘broadly, the ACCC may grant an authorisation when it is satisfied that the public benefit from the conduct outweighs any public detriment.’

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Alex Zaharov-Reutt

One of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.

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