ACCC Blocks Australian Cab Industry's Uber Competitor App

Uber took the Australian cab industry by surprise with its easy to use app and cheap prices. Since it launched in 2012, the cab industry has been stamping its collective foot, while hurriedly trying to put together an app it could use as a competitor to the ridesharing industry's darling child. That app is called ihail, and unfortunately for the taxi industry, it has just been struck down by the ACCC over competition concerns.

The ihail taxi booking app would have served as a competitor to Uber, uniting the likes of Yellow Cabs, Silver Top Taxi Service, Black and White Cabs, Suburban Taxis and Cabcharge under the same banner. Users would be able to open the app and hail any taxi nearby digitally, regardless of the taxi network the cab was owned by.

If it were allowed to proceed, the app would have launched in major cities around the country, as well as regional centres in Australia -- places where Uber is rapidly trying to expand into.

If ihail were launched, Cabcharge would continue to operate its payment terminals in cabs around the country, while the other cab networks would continue to operate their own booking apps. Payments processed through ihail would be handled by Cabcharge. And herein lies the problem.

The ACCC agrees that the ihail system would have made booking a cab way more convenient, but says that it can't be allowed to proceed for fear of future competition issues.

"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," Chairman Rod Sims said in a release today.

He added:

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. Depending on the rate of take up of the ihail app amongst other taxi networks, it could potentially grow to include all taxi networks in any area.”
“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,” Mr Sims said.
“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. 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.”

On top of shutting out other payment networks and other cab networks, the ACCC expressed additional concerns that ihail would affect general access to taxis during peak hours for those without the app and the financially disadvantaged. The cab industry wrote in its proposal a similar system to Uber's surge pricing mechanic which would allow users to pay more during peak periods for access to a cab.

This is only a draft decision, however. The ACCC is now working with ihail to see if a fix can be agreed upon before the final decision towards the end of the year.