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

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The practices raised with the inquiry are concerning. In principle, brokers have a legitimate role in finding the best deal for their clients (be they sellers or buyers of licences or assignments). However, the allegations regarding cash payments and under-reporting are serious and cast doubt on the benefits of the prevailing system of licence and assignment brokerage. The inquiry’s analysis suggests that the findings made by the Victorian Government and by the ESC in 2005 are still pertinent. These findings resulted in the (unsuccessful) attempt to have more trading of assignments occur on an exchange. These reforms were designed to increase transparency to reduce transactions costs and the inquiry’s view is that these objectives remain important. 75 Inquiry findings è There is a correlation between increases in assignments and assignment prices with decreases in service performance. However, this does not mean there is a causal relationship. è Assignments allow licence holders to transfer all responsibility for service provision to operators. This may be responsible for a decline in service, although there are limited incentives for performance generally. There are limited incentives for high service quality under any restrictive licensing regime. è Assignments have ambiguous effects on industry efficiency and fares. In practice, they have been included as costs in fare-setting models and so consumers pay more than they need to. However, assignments can improve the efficiency of the taxi fleet by allowing more efficient operators to build fleets. è The industry practices relating to the assignment of taxi-cab licences appear to be imposing heavy costs on both licence owners and assignees of licences. 10.3.6. Sub-assignments A sub-assignment of a licence is prohibited under Section 150(5) of the Transport (Compliance and Miscellaneous) Act 1983. 76 The inquiry understands that this practice most commonly occurs when a driver takes a vehicle under a set price bailment agreement for a period of time and shares the driving of that vehicle with another driver (who is charged rental for the vehicle by the first driver). The VTD refers to the practice of sub-assignment in its submission, characterising the main effect of this (illegal) practice as follows: A sub-assigning operator becomes a further person diverting taxi revenue from participants actually contributing to service outcomes, and undermines regulatory attempts to establish a chain of accountability. 77 The VTD comments that its experience with enforcing sub-assignment laws also suggests that these practices could potentially undermine other reforms such as moves to further limit assignments on existing licences. The inquiry notes the VTD’s concerns and acknowledges the views of other market participants about the detrimental nature of these practices (including the VTA). These practices appear to expose a broader weakness within the regulatory framework, in that the licensing regime restricts the number of vehicles rather than ensuring the quality of service provided by operators and drivers. It also raises the issue of whether operators should be allowed to abrogate responsibility for their drivers by using bailment arrangements, as opposed to employee arrangements that would place greater responsibility on the operator for the actions of employees. 10.3.7. Three-year limit on assignments There are around 80 assignments made or renewed each month. Section 150(4A) of the Transport (Compliance and Miscellaneous) Act 1983 states that assignments can only be for a maximum of three years. The VTD supports the amendment of the maximum assignment period, recommending that it be aligned with maximum vehicle age limits. This is because the assignment limit can create a situation of vulnerability for an assignee approaching the expiry of an assignment. In seeking renewal of the assignment, the assignee may be offered unfavourable terms because the assignor may be aware that the assignee has financial commitments (such paying for a vehicle). 75 The influence of taxi licence and assignment brokers on assignment prices is examined in greater detail in Appendix E 76 The assignee of a licence under this section shall not assign or attempt to assign his rights under the assignment 77 VTD, Op. Cit., p.26 Understanding industry performance CUSTOMERS FIRST 205
Technically, the Act states that assignments cannot be ‘renewed’. 78 This appears to mean that the maximum limit could be quite harmful in practice, although it is probably more likely that it is being ignored. Nonetheless, it still operates to disadvantage assignees of licences. The inquiry can see no reason for its retention. Inquiry finding è The three year limit on assignments is unnecessary and harms the interests of assignees without benefiting assignors of licences. 10.4. Taxi-cab zones Taxi-cab licences are issued subject to conditions that restrict the areas in which taxis can operate. They also impact on competition between network service providers or depots. 10.4.1. Current zones and conditions and their rationale Licences are issued for the metropolitan zone, the outer suburban zone (covering Dandenong and Frankston), the Geelong, Bendigo and Ballarat urban zones and country zones. The boundaries of the metropolitan, outer suburban and Geelong urban zones are specifically designated by roads, while the boundaries of the Bendigo and Ballarat urban zones are the areas within a radius of 13 kilometres and 11 kilometres respectively of the main post offices. The Mornington Peninsula is covered by two zones – the Western Port and Port Phillip zones – the boundaries of which are defined by specific roads. The boundaries around country towns vary, with many being a designated radius from the local post office (see Table 10.4). The size of this radius appears to vary widely for reasons that are unclear. However these boundaries are defined, it is likely that as settlement patterns and population change over time they will become less and less appropriate, unless they are changed. Table 10.4 Radius applying to a selected number of towns Bairnsdale Warrnambool Shepparton Traralgon Wodonga 12 kilometres 10 kilometres 8 kilometres 4.8 kilometres 3.2 kilometres Generally, only cabs that are licensed to a particular zone can engage in rank (expressed as ‘stand at designated standing places’) and hail work in that zone. However, it is possible for taxis to undertake pre-booked work in other zones. For example, metropolitan taxis can operate in the rest of the state, with some restriction in the outersuburban zone. The condition placed on conventional metropolitan zone taxi licences is that “the licensed vehicle/s may be operated for the carriage of passengers from places within the metropolitan taxi-cab zone… or from any place in cases where the vehicle is ordered and bespoken from an approved depot to any place within the State of Victoria, save and except on any journey wholly within the outer suburban taxi-cab zone...” 79 This appears to indicate that metropolitan-zoned taxis can undertake journeys that are wholly within the urban and country zones when they are pre-booked. Similarly, outer suburban taxi-cabs can operate in their own zone and do pre-booked work elsewhere in the state, but cannot undertake a journey wholly in the metropolitan zone. Similar conditions apply in relation to the Geelong, Bendigo and Ballarat taxis, except that they are prohibited from undertaking journeys wholly in the metropolitan and/ or outer suburban zones. Taxis licensed to the Western Port and Port Phillip zones are required to operate in those zones. Country-zoned taxis can undertake bookings outside their zones but cannot undertake any journey wholly within any of the non-country zones. The rationale for maintaining these restrictions is not spelled out clearly anywhere, but seems to reflect a combination of history, local taxi operator protection and a desire to ensure the availability of services in specific locations. It has been suggested that the Transport Regulation Board introduced zones to ensure cabs were available in outer suburban areas, rather than just going where most of the work was available. However, if this was the case, it is difficult to explain why metropolitan-zoned cabs are prevented from undertaking journeys solely within the outer suburban zone by their licence conditions. 78 See section 150(4C): An assignment under this section cannot be renewed and cannot be varied so as to extend the period of the assignment 79 General condition 1.4, Conditions Governing the Operation of Metropolitan Zone Taxi-cabs, effective from 13 December 2008 206
Page 2 and 3: Part D Understanding industry perfo
Page 4 and 5: The number of licences is restricte
Page 6 and 7: 9.2.2. Quality and safety controls
Page 8 and 9: Case study New Zealand’s experien
Page 10 and 11: Case study Singapore’s unique reg
Page 12 and 13: Case study London’s quality contr
Page 14 and 15: A report commissioned by the inquir
Page 16 and 17: Another possible explanation for hi
Page 18 and 19: From these comparisons, we can obse
Page 20 and 21: New Zealand is an example of a taxi
Page 22 and 23: Chapter 10. 10. Taxis, hire cars an
Page 24 and 25: 10.1.2. Substitution with public tr
Page 26 and 27: Nonetheless, there are market mecha
Page 28 and 29: 10.2.2. Detriments from restriction
Page 30 and 31: On the other hand, some submissions
Page 32 and 33: 4. The regulatory burden of decidin
Page 34 and 35: Country licence releases and the pu
Page 36 and 37: 10.2.3. Are there offsetting benefi
Page 38 and 39: The inquiry conducted research into
Page 40 and 41: 10.2.4. Valuing the effect of licen
Page 42 and 43: It would also be possible to implem
Page 44 and 45: Inquiry findings è The detriments
Page 46 and 47: In its 1999 report, KPMG argued tha
Page 48 and 49: 10.3.4. Effect on taxi operators an
Page 52 and 53: Historically, the zones generally r
Page 54 and 55: Merging the taxicab markets of two
Page 56 and 57: A further summary of these data is
Page 58 and 59: 10.5. Regulation of taxi-cab fares
Page 60 and 61: • It exposes taxi operators to a
Page 62 and 63: KPMG argued that these restrictions
Page 64 and 65: 10.7. Vehicle regulations Taxis and
Page 66 and 67: Advertisements The policy to remove
Page 68 and 69: In recent years, NSPs have increase
Page 70 and 71: Some respondents argue that the mar
Page 72 and 73: Driver obligations to the NSP NSPs
Page 74 and 75: There are nine accredited secondary
Page 76 and 77: From 1953, the use of two-way radio
Page 78 and 79: 11.4.2. Mandatory network affiliati
Page 80 and 81: The inquiry considers that there is
Page 82 and 83: Walters FM also said: Until such ti
Page 84 and 85: The ACCC has been called on a numbe
Page 86 and 87: The ACCC also noted that West Subur
Page 88 and 89: This also means that other NSPs and
Page 90 and 91: Metropolitan NSPs charge affiliatio
Page 92 and 93: Figure 12.1 Average fare costs, met
Page 94 and 95: 11.8.3. Affiliation with more than
Page 96 and 97: However, unlike most other goods an
Page 98 and 99: 12.3. Characteristics of the paymen
Page 100 and 101:
A further key feature of two-sided
Page 102 and 103:
Case study Cabcharge penalised for
Page 104 and 105:
To compete with Cabcharge, the newe
Page 106 and 107:
12.5.1. Removing regulatory barrier
Page 108:
In addition, given the well establi
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