Govt should ensure level playing field

“TAXIS cannot compete with e-hailing services and therefore the government has to stop them,” say taxi drivers and taxi companies in Malaysia. It is true that taxis are unable to compete with e-hailing service providers. But the solution is not to stop e-hailing services but to provide taxi drivers with the ability to compete with such services.

A crucial step in this is to ensure that e-hailing service providers do not abuse their currently dominant position, defined by the Competition Act 2010 as “a situation in which one or more enterprises possess such significant power in a market to adjust prices or outputs or trading terms, without effective constraint from competitors or potential competitors”. With Uber exiting the Malaysian e-hailing industry in return for shareholding in Grab, Grab arguably has become the dominant e-hailing company in Malaysia. The Malaysia Competition Commission should investigate Grab’s current practices and continuously monitor the company to ensure that it competes fairly.

In parallel, the government must revive the taxi industry to provide healthy competition in the market for public car-based transportation. The government must be singleminded in achieving the dual objectives of providing urban citizens with safe and affordable public car-based transportation as well as ensuring a reasonable income for those in the transportation sector.

The existing model, where taxis are rented out by taxi companies to taxi operators, has been disrupted by e-hailing. Taxi companies can no longer reap taxi rentals without regard to the competition posed by e-hailing service providers. At the same time, taxi drivers can no longer be assured of a pool of passengers because of the abundance of e-hailing cars. This is made worse by visibly bad publicity about the conduct of taxi drivers, although there are plenty of e-hailing drivers who have been disciplined by e-hailing service providers too that do not make newspaper headlines.

The first step to level the playing field is to require e-hailing service providers to have at least 50% of their total fleet to be made up of taxis. This will enable taxis to get on the platform, while e-hailing service providers can condition taxi drivers to provide better services. Those who cannot make the grade will be expelled from the system based on the same criteria that apply to e-hailing drivers.

This will also enable taxis to charge variable prices, just like e-hailing cars are able to impose a controlled surcharge during peak hours. While e-hailing cars are able to vary the prices to take demand into account, taxis are bound by static pricing. The fares for taxis during peak hours are below market, while the fares during off-peak hours may be above market. The regulator should prescribe a floor and ceiling for fares to protect consumers and to encourage healthy competition.

The next step is to stop taxi companies from getting a free ride by merely renting out their taxi licences. Taxi licences should be redistributed to taxi drivers. It is recognised that many of them are unable to purchase their own vehicles, therefore a funding mechanism must be set up to enable them to own/rent newer, more fuel-efficient vehicles that meet consumer expectations.

This fund could be funded by a small levy on the gross revenues of e-hailing service providers, much like the levy imposed by regulators in other sectors such as the stock market, commodities, etc.

The discourse on taxi vs e-hailing has been going on for too long, resulting in poor services to ordinary citizens, low income to taxi drivers, and fostering, arguably, anti-competitive behaviour by dominant players. It is time that the government musters the will to do something about it.

The first step to level the playing field is to require e-hailing service providers to have at least 50% of their total fleet made up of taxis.