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

11.8. Regulation, performance
and reform
Major structural reform of the role of NSPs within the taxi
market appears to be critical to delivering sustainable taxi
reform. In particular, reforms should aim to:
• Improve accountability for service delivery by making
it clear that the responsibility for the delivery of taxi
services rests with the taxi company whose name
appears on the taxi vehicle and whom the customer
reasonably believes is delivering their service
• Increase offerings in the market by encouraging
competition and relaxing regulations that currently
inhibit new taxi companies from forming and
becoming established
• Improve taxi operators’ bargaining power and give
them a choice to affiliate with one or more NSPs or
to operate independently, taking responsibility for
meeting quality standards themselves
• Ensure that driver and passenger safety is protected.
While the inquiry’s overall reform package has significant
implications for NSPs, key areas of reform are
summarised below. A description of how these areas
interact with the inquiry’s broader reform proposals is
contained in chapter 19.
11.8.1. Mandatory affiliation requirement
The rationale for mandatory affiliation is often stated to
provide for the safety of the passenger and the driver
and to provide universal access to taxis for customers.
Mandatory affiliation is a feature in many taxi markets in
local and overseas jurisdictions, but not all jurisdictions.
It does not apply in London for example. However, a
requirement to maintain a direct link with the taxi vehicle
seems desirable to provide for the safety of the driver,
however, this does not mean that this can only be met
through mandatory affiliation with a network.
On the other hand, the case for universal access in the
current market is difficult to validate and appears to be
an objective that emerged in an era of less sophisticated
communications where mobile phones and internetenabled
portable devices were not commonplace. The
argument for universal access is further weakened in
light of its failure to actually deliver a guaranteed service.
Increasingly, taxi consumers are turning to other channels
to book taxis, meaning that the ‘problem’ of universal
access has largely been overcome. This objective is
also contrary to more efficient market based regulation
where customers will gravitate towards companies that
can offer a service that meets their expectations. These
customer expectations could include wait times, driver
competency, vehicle type and potentially price.
As discussed above, the removal of the requirement for
taxi operators to affiliate with a primary NSP is unlikely to
result in many operators cancelling their affiliation. Even
though an operator may only perceive a small number of
bookings through a network, affiliation may be seen as
something of a safety valve for the operator. Operators
may also gain value from other services provided by
the NSPs and inertia may inhibit some operators from
moving. Experienced drivers and operators with their
own book of private clients are more likely to move away
from taxis altogether and take advantage of the inquiry’s
recommended reforms in the hire car sector. Hire cars are
discussed further in chapter 14 of this report.
Despite the likelihood of little impact in the short term,
the inquiry considers there are a number of reasons to
remove the mandatory affiliation requirement. First, the
case for maintaining the regulation no longer justifies the
restriction and so only constrains the market. Second,
the restriction has the potential to distort the market
for NSP services and removing it will assist operators
to obtain better value for money. Third, removal of the
mandatory NSP affiliation would assist in lowering the
barriers to entry for new networks to enter the market.
11.8.2. Restriction on NSPs refusing
affiliation to taxi operators
Regulation currently exists that prevents NSPs from
refusing to offer affiliation to taxi operators without
a reasonable excuse. This regulation is presumably
associated to mandatory affiliation. Removal of
mandatory affiliation should therefore enable NSPs to
cancel an operator’s affiliation as operators will still be
able to ply for hire directly within the rank/hail market and
by sourcing their own client list.
The removal of mandatory affiliation coupled with
relaxation of the restriction on refusing to offer affiliation to
operator will improve the ability of taxi booking services
to ‘protect’ their brand against poor quality drivers/
operators. This will be consistent with a new model
of stronger competition where customer service is
paramount to a successful business.
The inquiry acknowledges that there will be concerns from
industry participants that NSPs may be able to use this
measure for reasons other than protecting their brand such
as to bundle other products offered by the organisation.
However, safeguards to prevent abuse of market power
exist under competition law and normal administration
law procedures should apply to ensure operators are not
treated unfairly in being refused affiliation.
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