Authorisation of ihail App to be Denied by ACCC
Tuesday 13 October 2015 @ 9.44 a.m. | Legal Research | Trade & Commerce
The Australian Competition and Consumer Commission (ACCC) has issued a Draft Determination which proposes to deny authorisation to ihail Pty Ltd (ihail) for 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.
On 17 July 2015 the ACCC decided not to grant interim authorisation to ihail Pty Ltd's proposed arrangements.
Proposed benefits of the ihail app
If launched, 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 initial members of the joint venture include:
- Yellow Cabs;
- Silver Top Taxi Service;
- Black and White Cabs;
- Suburban Taxis; and
- Cabcharge (ASX:CAB).
Concerns raised by the ACCC
The ACCC considers that the ihail app is likely to result in some public benefits by providing an additional, convenient single platform for consumers to book taxis from a pool of taxi networks that is likely to be broader than that provided by any existing taxi booking app, including potentially internationally. However, the ACCC also considers that the proposed arrangements are likely to result in significant public detriment.
As stated at [para 202] of the Draft Determination, the ACCC has outlined why authorisation should not be granted as it considers that the application fails the Net Public Benefit Test:
"The ACCC considers that the ihail app is likely to result in a public detriment by reducing competition between taxi companies in supplying services to customers using the app. As jobs are given to the first driver to accept the fare, regardless of network, each taxi network could expect to receive a share of ihail bookings roughly equal to their share of taxis using the app (that is, the number of taxis in their network as a share of all taxis using the app). Differences in the price of fares or quality of service offered by taxi companies will have no bearing on the share of ihail fares they receive. The ACCC also considers that the ihail app may reduce competition between taxi companies and between taxi networks more broadly."
The relevant tests for consideration of this application for authorisation are set out in ss 90(5A), 90(5B), 90(6) and 90(7) of the Competition and Consumer Act 2010 (Cth) (the Act).
Comment by the ACCC
Commenting on this matter in a recent ACCC Media Release, the Chairman of the ACCC, Rod Sims said:
“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...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.”
Lessening of competition a concern for the ACCC
That it is proposed 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, is of concern to the ACCC:
“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 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.”
Benefits of Authorisation
Authorisation provides immunity from court action for conduct that might otherwise raise concerns under the competition provisions of the Act. 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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Sources:
ACCC proposes to deny authorisation of ihail taxi booking app – ACCC Media Release MR 192/15
