Jul 01, 2015

I would like to take this opportunity to raise with you a couple of what I see as important issues in the current theoretical discussion relating the emergence of ride hail services in Victoria.

In determining how ride hail services should be regulated, the first issue that must be addressed is why any specific law, regulation or licencing is required when there are already rules in place that regulate the provision of commercial passenger vehicle services. At the outset, it must also be made clear that this kind of service we call ride hailing is a commercial activity. It does not satisfy the definition of car-pooling as currently defined in Sections 86 and 87 of The Transport (Compliance and Miscellaneous) Act 1983 (the Act) because as the travel is not ‘incidental’ to the driver's journey (in fact it is the sole purpose of the journey), and both the driver and the app provider are profiting from the passenger's travel. 

Victorian laws and regulations must address the emergence of the ‘electronic hail’ whereby the distinction between hail and pre-booked work has been significantly blurred. The legislation needs to embrace and define the term electronic hail, as distinct from a pre-booking.

Importantly, ride hail does not constitute a pre-booking. Ride hail services, like Uber X, do not permit advanced bookings like taxi and hire car industry booking systems. It is limited to ‘ready to ride’ services. This is important for a number of reasons, none more so than providing a clear justification for drivers who engage in the provision of type of service to meet exactly the same knowledge testing requirements (if they are to exist) as a taxi driver.

Simply imposing hire car regulations upon ride hail type services is not sufficient.  Hire car regulations differ from taxis on the grounds that hire cars accept only pre-booked services for a different market to taxis and thus have the ability to pre-plan journeys.  This is the not the case with an electronic hail.  Uber themselves offer two distinct services for two different markets – traditional hire car services via Uber Black and a new illegal hybrid model via Uber X. This again highlights the differences between the two.

This conceptual definition of the product also provides a clear justification as to why the price these services provide should be regulated by a maximum fare.  Customers are not able to make an informed choice because of the immediacy of the booking. Furthermore, paying more will not necessarily see the service delivered in a more timely fashion because during periods of high demand the wait times are constrained by supply across all services. Employing surge pricing in periods of high demand does not alter supply despite them being asked to pay more.

If ride hailing services are to be permitted to conduct their service without the need for drivers to complete the taxi driver knowledge modules, or abide by maximum fare regulations, both must be removed from taxis to allow them to compete on fair grounds. As the VTA have repeated on a number of occasions, if these regulations were removed, the biggest loser would be the consumer burdened with either, or both, higher prices and/or a decline in service quality.

Any regulation should be based on its need to address a market failure or ensure community/passenger/driver safety. In this respect, it is important to remember that a wide ranging review (VTII) of the Victorian taxi and hire car industry has only just been completed by apparently eminent experts. It has been suggested that the timing of the review was poor, because since its completion the Uber product(s) has arrived in Australia. The VTA do not share this view. Ride hail providers, like Uber, were well established in overseas markets during the period in which the VTII took place and the VTII team travelled oversees to discuss issues affecting other jurisdictions as part of the Inquiry process. 

In conclusion, I would like to suggest that one of the most important aspects of this discussion or outcomes derived from it must be imposition of a new penalty and sanction regime. The sanction and penalty regime as it currently applies must be reviewed and adjusted to recognise this shift and the proven ineffectiveness of the existing regime to deter systematic noncompliance. Penalties and sanctions should present a meaningful commercial disincentive to any party that might otherwise make a commercial decision to continue to operate outside the law and include provisions such as a loss of demit points for a repeat offender.

It is important to recognise that there have always been individuals who break the law and provide illegal taxi and hire car services. In the past the penalties and sanctions were high enough to dissuade individuals from continuing to break the law.  The emergence of a company in Victoria that is willing to systemically break the law in providing illegal services despite the imposition of fines upon its drivers (and to go as far as to offer to pay the fines on behalf of its drivers) demonstrates that this paradigm has shifted significantly. Penalties and sanctions should present a meaningful commercial disincentive to any party that might otherwise make a commercial decision to continue to operate outside the law.