Part D – Understanding and improving industry performance (PDF ...

9.3.3. Quality and safety controls
In its assessment of taxi regulation regimes, the OECD noted:
Removing entry restrictions does not imply removing
quality based regulation. Indeed, supportive
regulation is a precondition for fully achieving the
potential benefits of adopting an open entry policy.
That said, remaining regulatory arrangements must
not unduly inhibit the development of innovative
service offers and industry models. 14
Jurisdictions examined by the inquiry have taken
different approaches to liberalisation by including in
their approaches the introduction, maintenance or
indeed strengthening of quality and safety regulations to
encourage improvements in quality and safety standards.
In New Zealand, quality controls were imposed on
standards for vehicles, driver competence and operator
performance prior to liberalisation. These controls were
maintained following liberalisation and strengthened
several years into the reform. Today, new licence holders
are subject to a ‘fit and proper person’ test and are
required to be affiliated with an ATO, with ATOs subject
to a number of minimum quality standards. Taxi drivers
are subject to background criminal and annual medical
checks, must pass a first aid course and must hold an
‘area knowledge certificate’ for the area in which they
operate. Specialist taxi enforcement staff conduct regular
checks on vehicle compliance with requirements.
In Sweden, despite liberalisation of entry and fares
in 1990, quality controls were reinforced. Applicants
were subject to more rigorous assessments in relation
to competence in operating a taxi service, as well as
their economic capacity and character. In 1995, stricter
rules for drivers were introduced, with drivers subject
to geographical knowledge tests and criminal checks.
Sweden is considered to be one of the jurisdictions with
the strictest requirements on taxi drivers. 15
The Singapore Land Transport Authority introduced
a new set of Quality of Service Standards to ensure
minimum service standards at the time of deregulating
entry controls in 2003.
In Phoenix, problems with service standards following
entry and fare deregulation during the 1980s led to
Arizona deciding to introduce background criminal
checks for taxi drivers.
There is a common theme that some minimum quality
and safety controls are necessary to ensure adequate
outcomes in this industry. As the OECD has observed:
“deregulating taxi supply does not, in conceptual terms,
necessarily imply removing or even downgrading quality
regulations”. 16
Indeed, quality regulations are critical to maintain higher
quality services and avoid excessive entry (which lowers
standards where competition is ineffective). For example,
this has worked in London where, despite open entry,
the barrier to entry via stringent quality controls on
drivers (such as ‘The Knowledge’ test) and administrative
delays still creates positive service outcomes (see case
study). New Zealand’s ATO model also ensures there are
minimum quality standards in the taxi industry.
The same arguments apply to the need for safety
regulations, particularly due to asymmetric information
about the safety of the taxi vehicle, driver and/or
passenger prior to the service being delivered. It has
been argued that entry restrictions themselves do not
ensure safety standards for taxis, and well-targeted
safety regulations are more appropriate. 17
Different jurisdictions have maintained, reinforced
and, in some cases, removed specific quality
and safety controls. The inquiry considers that
the level and effectiveness of these controls need
to be well-considered and well-targeted.
14 OECD (2007a), Op. Cit., p.10
15 OECD (2007a), Op. Cit., p.48
16 Bekken, J.T. (2007), ‘Experiences with (De)regulation in the European
taxi industry’, in OECD (2007a), (De)regulation of the taxi industry,
Economic Conference of Ministers of Transport, Round Table 133,
p.48
17 Productivity Commission (1999), Regulation of the Taxi Industry,
Ausinfo, Canberra, p.12
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