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

Case study
Deregulation in Ireland
From 1978 to 1999, the Irish Government maintained quantitative restrictions on the number of taxi licences
issued. Throughout this period, the number of licences issued failed to keep pace with the demand for taxi
services and there was widespread customer dissatisfaction with the poor availability of taxis in peak periods.
Licence values in Dublin were in excess of IR£100,000 in 2000. Over the same period, there was strong growth in
the number of hire car licences, which has no restriction on the number of licences issued.
In 1999, amid calls for deregulation of the industry, the Irish Government decided to increase the number of
taxi licences by issuing 2,600 additional licence to existing licensees and 500 licences to new entrants, with
preference given to current taxi drivers.
The Government’s actions were challenged in the courts because of the preferential treatment given to current
licensees over new entrants. The Irish High Court found that the Government did not have the power to restrict
the rights of entrants where the criteria were unrelated to qualitative standards. Following this decision, the
Government effectively removed quantity restrictions overnight.
The Government also determined that no compensation was to be paid to licence holders. This decision was
also challenged in the courts, where the Irish High Court made it clear there was no legal obligation on the
Government’s part to compensate operators for losses associated with changes of licence value.
Further lobbying by former licence holders led the Government to establish a Taxi Hardship Panel to examine
cases where extreme personal financial hardship was alleged as a result of these measures.
The panel did not consider compensation for loss of licence value as such; rather, it considered payments
‘solace’. Total payments of about €16.5 million were made, which represented less than five per cent of the total
cost of paying full compensation.
9.3.1. Entry controls
The OECD has observed:
Restrictions on entry to the taxi industry constitute
an unjustified restriction on competition. Regulatory
capture frequently means that these restrictions
lead to large transfers from consumers to
producers, economic distortions and associated
deadweight losses. 4
Liberalisation of the taxi industry is invariably associated
with the liberalisation of licences. This is usually done
through a government removing the quantity control on
the upper limit of the number of licences permitted to
operate in its jurisdiction. In most cases, this means that
anyone who complies with some predetermined criteria
for applying for a licence (such as a background criminal
check, payment of an administration fee and so on) is
granted the licence. Removal of entry controls typically
occurs in conjunction with relaxing fare controls.
One of the most discussed examples of deregulation of
licences is Ireland, where deregulation was immediate –
effectively occurring overnight (see case study). In 1999
a High Court decided against the Irish Government’s
approach to the release of new licences, citing that
the government’s action gave preferential treatment
to current license holders over new entrants. The
Government’s response was to effectively allow the
removal of quantity restrictions on licences.
The number of taxi licences increased significantly and
waiting time for taxis reduced dramatically. At the time,
however, there was no standardised fare system and
limited quality standard controls. The sudden liberalisation
of licences led to calls from the industry for the return of
controls and for more effective quality regulation.
4 Ibid., p.7
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