The Australian Competition and Consumer Commission (ACCC) is planning to knock back a new smartphone taxi booking app to rival Uber over fears that it will reduce competition.
The joint venture project, titled “ihail”, between ASX-listed Cabcharge and companies such as Yellow Cabs, Silver Top and Suburban Taxis, also has US interests on the tech side and plans to launch internationally too, but ACCC Chairman Rod Sims said his organisation believes it “would have a significant impact on competition in the taxi industry, which could impact prices and quality of service”.
Like Uber, ihail payments would be processed via the app, and not in the cab and handled by Cabcharge. The company has previously fallen foul of the competition watchdog over monopoly concerns and earlier this year, struck a deal with the ACCC to allow rival companies to process Cabcharge payments for the first time.
The ACCC raised concerns about the app shutting out competitors to provide non-cash payment processing services to ihail customers.
Cabcharge wants to roll out the ihail app in capital and major regional cities and applied to the ACCC for interim approval in July, but was knocked back.
The app sources the nearest cab, regardless of network, in the same way Uber in Sydney uses taxi drivers signed up for its ride-sharing app. It also lets passengers to offer to pay extra when requesting a taxi to entice drivers to take the job.
The ACCC was concerned that could reduce access to taxis during peak periods for financially disadvantaged people.
Rod Sims said the initial ihail shareholders represent more than half the taxis in Australia, and a larger share in the metropolitan areas.
“The ACCC accepts this app would provide a more convenient way for consumers to book taxi services, but in the draft determination the ACCC takes the view that this comes at too big a cost to competition,” he said.
ihail Pty Ltd COO Nick Kings said the company was disappointed with the draft decision.
“We continue to work with the commission and are committed to securing a positive outcome,” he said. “We believe that ihail offers customers compelling public benefits that show the commitment and dedication the industry has towards to innovation in a challenging market.”
Cabcharge CEO Andrew Skelton said Cabcharge has around a 10% in ihail and the decision will not effect its own plans for its proprietary taxi apps.
“The convenience of the ihail app for consumers is the ability to use the same app wherever they are, without needing to navigate different apps servicing various brands,” he said.
“Having mandatory in-app payment is nothing new, and Cabcharge providing the payment gateway for the ihail app is no different to this function being provided by a bank.”
Rod Sims said there were concerns about the impact of ihail on existing apps such as goCatch and ingogo.
“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.”
The ACCC is now seeking submissions from ihail Pty Ltd and others over its draft determination, before a final decision by the end of 2015.