May 01, 2016

By David Grant, Partner and Eliza Buchanan, Solicitor, Logie-Smith Lanyon

iHail is the taxi industry’s legal competitor to the illegal and unregulated UberX.

iHail has successfully negotiated its way through the myriad of complex laws and regulations that govern the legitimate provision of taxi services in Victoria, unlike the illegal UberX app, which burst into the market with no regard for regulations or the law.  

It is a response to a call from the public for greater access, ease of payment, modernisation and convenience in the use of legal taxi services. iHail, and like products give the taxi industry an opportunity to compete with services such as Uber in the booking market. iHail is a positive development for the taxi industry, which will promote growth and competition, the result of which can only benefit the public.

iHail will benefit consumers by being a one-stop app for transport services throughout Australia, and internationally.

However, the legal and regulatory hurdles, which iHail was forced to overcome to obtain authorisation, provide yet another example of the unequal playing field that is the taxi industry.

What is iHail?

iHail Pty Ltd is a joint venture company established by Yellow Cabs, Silver Top Taxi Service, Black Cabs, White Cabs, Suburban Taxis and Cabcharge, to create a smart phone app for booking of taxi services across these network providers, interstate and internationally. The app will be available to both Apple iOs and Android services in June 2016.

Understanding that the app may fall foul of laws regulating competition, its developers sought authorisation from the competition and consumer regulator, the ACCC, prior to rolling out the app.

The first application for exemption submitted to the ACCC in May 2015 was rejected by the ACCC, broadly because in their view it potentially impacted negatively on competition in the wider industry.

The ACCC’s reasons for rejecting the initial application included that:

Interestingly, in considering that iHail would become the dominant taxi booking application on the market, and thus arguing that iHail would result in reduced competition in the market, the ACCC considered the “market” to include both taxi services and ridesharing services, such as Uber.

In response to the ACCC’s rejection of the initial application, iHail made some significant amendments to the app, which were subsequently approved by the ACCC in March 2016.

The app is now authorised to compete in the market for three years, until 12 April 2019. The following notable changes to the app were made in order to obtain ACCC authorisation:

The ACCC still harbours concerns that the ownership structure of the iHail joint venture would limit competition – as the number of taxi drivers affiliated with the various joint venture partners of iHail is so great that any other similar platform that commences in competition with iHail would never be able to properly compete. This is a factor in the authorisation being granted for 3 years only.

Priority Dispatch – the Taxi Industry’s answer to Surge Pricing?

iHail’s initial application for authorisation included an application for exemption relating to the priority dispatch option available to consumers.

The priority dispatch option allows a potential passenger to offer to a driver, prior to booking, an extra payment over and above the ordinary fare, in order to facilitate faster pick up.

The ACCC argued, in its initial rejection of iHail’s application for authorisation, that this option potentially discriminates against the financially disadvantaged consumer, who is forced to wait longer times for taxis.

Interestingly, the amended iHail application for exemption no longer sought authorisation for priority dispatching. According to the ACCC’s final report, this was on the basis that iHail considered that the exemption is not required, as it does not contravene any laws.

The priority dispatch option is an interesting alternative to the surge pricing model adopted by Uber. Because surge pricing is inescapable for the Uber consumer, as it is automatically implemented in times of great demand for ride sharing services (consider, for example, during the Lindt café siege in Sydney), it results in discrimination against those who are financially disadvantaged.

Conversely, the priority dispatch option in the iHail app is simply an extra option available to the consumer, and is not automatically imposed upon all users of the iHail app. Therefore, those consumers who are financially disadvantaged will not be rendered completely unable to use the app, or access taxi services through the app.

Where to next?

The successful authorisation of iHail, as a new player in the taxi industry, shines a spotlight the extraordinary lengths a legitimate entity must go to in order to comply with the myriad of laws and regulations governing the industry, which UberX is blithely disregarding.

iHail should be commended for its dedication to creating a strong competitor to ridesharing technology and competitors.

The ACCC considers that both Uber (including UberX) and the taxi industry operate in one market. This is significant as it suggests that one set of regulations ought properly apply to all industry participants.

However, perhaps the most interesting aspect of iHail is the extended campaign it had to mount in order to be granted authorisation to operate. It is yet another example of the taxi industry being unfairly prejudiced by regulators who lack the incentive and the will to prosecute those who operate in breach of so many laws.