The taxi industry’s latest effort to tackle ride-sharing services, a new app called iHail, could soon be blocked after the Australian Competition and Consumer Commission (ACCC) this week detailed concerns over its impact on competition in the market.
The iHail app is a joint venture project developed by Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge. Its stated purpose is to provide passengers with a single taxi booking platform and advice on the nearest available taxi, regardless of the company or network it operates under. (Pictured above: Uber app on iPhone.)
Although the app has been developed to help taxi companies level the playing field in their battle with growing ride-share services like Uber and the independent taxi-booking app GoCatch, the ACCC believes iHail 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,” ACCC chairman Rod Sims said.
“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 that the iHail app’s launch would likely produce “significant detriments” to the public, reducing competition between taxi networks, while the cooperative arrangement between the networks “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,” he said.
Worryingly, the app would also allow passengers to offer to pay an additional amount above the metered fare, encouraging drivers to accept that booking ahead of other potential customers.
That aspect of the app could be compared to Uber’s “surge pricing”, which activates during peak service times – where demand for rides is outstripping the ‘supply’ of drivers – ostensibly to encourage more drivers onto the road. The more drivers that come online, the smaller the impact of the surge pricing.
One test of Uber’s surge pricing in the US earlier this year, by the Washington Post, found that rather than encourage more drivers onto the road, it often instead motivates drivers to shift to areas of higher demand, where their fare will therefore be higher.
As that test found with Uber, the ACCC has raised concerns that access to taxis during peak times could be dramatically reduced for customers unable to bear the cost.
“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 said its proposal to block the iHail app is, for now, a draft decision, and it will accept submissions from iHail Pty Ltd before making a final decision in November or December.