The Australian Competition and Consumer Commission (ACCC) on Monday announced its intention to disallow a taxi industry joint venture which would see the launch of a new smartphone taxi booking app, ihail, in direct competition to ridesharing service Uber.
Whilst the watchdog said it accepts the ihail app would provide a more convenient way for consumers to book taxi services, ACCC chairman Rod Sims said the commission takes the view that this comes at too big a cost to competition.
"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," 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."
The companies involved in the ihail joint venture include Cabcharge, Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, and Suburban Taxis. The ACCC said the members are still planning to continue to operate their own booking apps.
"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," Sims said.
"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."
In response to the decision, Cabcharge released a statement on Monday afternoon, in which said it does not own ihail, rather it holds an approximate 10 percent stake of it.
"The marketplace currently operates with a number of similar apps, including some big global players, which presents significant competition in the local market," Cabcharge managing director and CEO Andrew Skelton said.
"The convenience of the ihail app for consumers is the ability to use the same app wherever they are, without needing to navigate different apps servicing various brands.
"Having mandatory in-app payment is nothing new, and Cabcharge providing the payment gateway for the ihail app is no different to this function being provided by a bank. A number of apps already operate in this way, offering a streamlined experience for the passenger."
Before the ACCC spiked the launch, Cabcharge was to be the payment provider for the ihail app. Cabcharge also noted that the ihail block will not impact its own plans for its proprietary taxi apps.
In June, the ACCC approved a court-enforceable undertaking from Cabcharge Australia to allow third parties to process Cabcharge cards.
"The undertaking opens up this market to further competition, and will provide third parties with the ability to process Cabcharge cards for the first time," Sims said at the time.
"The undertaking provides a clear pathway to facilitate third parties processing Cabcharge cards. If third parties obtain access, this will allow them to better compete against Cabcharge for processing revenue, as Cabcharge will no longer be the only terminal in a taxi that can process all forms of non-cash payment."
Last month, smartphone-based taxi booking service goCatch entered an agreement to partner with retail, mobile, and online payments provider, Mint Payments, to capitalise on in-taxi card payments.
The taxi industry, as well as state and federal governments, have been chasing the controversial ridesharing service Uber since it entered the Australian market in 2012.
Last month, 40 Uber drivers were issued suspension notices in New South Wales, in a bid to crackdown on illegal ride-sharing services. At the time, the NSW Roads and Maritime Services (RMS) said taxi and hire car services must have authorised and accredited operators, as well as a licensed and insured vehicle.
The RMS has been on Uber's case for a while, issuing court attendance notifications to Uber's Sydney drivers earlier this year.
In June, NSW opposition leader Luke Foley called on the state government to "embrace the digital age", announcing his plans to introduce a private member's Bill to regulate ride-sharing services, such as those offered by Uber.
A month later, the state government launched a task force which, according to the government, will work with customers, the taxi industry, hire car companies, and other stakeholders to examine the market's sustainability and competition, the impact of emerging technologies, the importance of customer safety, and the burden of current taxi regulations.
In late August, the taskforce, now known as the Point to Point Transport Taskforce, called for changes to be made to the current regulatory framework to reduce red tape and level the playing field for the taxi industry and other point to point transport services.
"Point to point transport providers have already begun to adapt, and government regulation must follow," the taskforce's discussion paper [PDF] said.
The taskforce published its submissions at the weekend, and, after months of campaigning by Uber, the San Francisco-based startup declared the support a win.
"This weekend, the NSW Government Taskforce reviewing the point-to-point transport industry released over 5,600 submissions made by the Sydney community and the message was clear -- Sydney wants ridesharing," Uber said in a blog post Monday morning.
Since the discussion paper was published, Uber had been actively campaigning for users of the service to submit a response to the taskforce, telling the industry it would be "actively involved in this process".
"We're calling on riders and drivers to make their voice heard, and ensure that the government knows that ridesharing is here to stay," Uber said in July.
On its blog, Uber also embedded a map for Sydneysiders to contact their local member of parliament in a bid to show their support for the startup on NSW streets.
At the end of last month, the ACT government became the first Australian jurisdiction to legalise ride-sharing, such as UberX, as part of new reforms to take effect from October 30, 2015. As part of the new regulations, UberX will be able to operate under similar conditions that taxi and hire cars face.
The Victorian government is gearing up to follow suit, by regulating Uber in the state by working on a regime that addresses passenger safety, driver and vehicle standards, and insurance issues.
The Queensland government previously said it would be reviewing its taxi strategy later in the year, and has not ruled out the co-existence of taxis and Uber services on the state's roads.
In Western Australia, the state's Department of Transport released its still-open green paper in July which centred on regulating the transport industry and ensuring consumer safety, with the state's minister for transport Dean Nalder hoping to "simplify this with a single piece of legislation".
"On-demand transport is a critical part of the wider transport system in Western Australia, and ensuring it has the flexibility to meet the challenges of a growing community is a high priority," the minister said at the time.
Last month, Uber found itself in court with the Australian Taxation Office (ATO), arguing during the first directions of Uber B.V v The Commissioner of Taxation of the Commonwealth of Australia that UberX drivers do not fall within the same definition as taxi and limousine drivers, and therefore should be required to pay the Goods and Services Tax (GST).
Updated 12 October, 2015 at 4.15pm AEDT: Added Cabcharge's response to the decision.