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Update on AFCA’s sector inquiry into the taxi and private hire car market

The Austrian Federal Competition Authority (AFCA) launched a sector inquiry into the taxi and private hire car market in September 2019. The AFCA will conduct a sector inquiry where there is suspicion of competition being restricted or distorted in a specific economic sector.

While an inquiry is ongoing, the AFCA may give an initial overview of the impact on competition in the market. The final report is due to be published in the summer of 2020.

First steps

The inquiry is an economic and legal analysis of the taxi and private hire car market, in the two regions of “City of Salzburg” and “City of Vienna”. The AFCA decided to focus on these two regions as there is increased competition in the market due to different business models being pursued.

The legal analysis included a comparison of the various regulations with the situation in other EU countries.

The AFCA also looked into the relevant laws with a view to determining their potential impact on competition:

  1. Occasional Traffic Act (GelverkG), former and amended version
  2. Federal Work Regulation for Non-scheduled Passenger Transport (BO 1994)
  3. Work regulations issued by provincial governments
  4. Other regulations issued by provincial governors (e.g. Viennese Taxi Fare Regulation).

With regard to the economic part of the inquiry, 200 taxi operators, private hire care companies and online intermediary platforms were asked to complete a questionnaire. The response rate was satisfactory. One striking result is that online intermediary platforms’ market data was more readily available and of a better quality than that provided by more traditional companies.

Initial impact on competition and innovation in the market

1. Digitalisation can cut regulation

Passenger transport apps and their rating functions put a question mark over the need for statutory regulation. When customers order a ride using an app, the app sends them information on the waiting time, price, vehicle and driver in advance. All of this makes the service more trustworthy and transparent, reducing the need for statutory regulation, particularly in relation to quality criteria.

2. New technologies bring markets up to date

Internet-based intermediary platforms in the taxi and private hire car market shake up competition and force traditional companies to embrace digitalisation. The use of technology means that customers get better services across the entire market.

3. EU-wide trend towards deregulation of taxi fares

A European comparison has shown that the taxi market leans towards deregulation. According to a study conducted by the European Commission in 2016, EU Member States generally legally stipulate fixed, maximum or minimum fares. The study found that 16 Member States capped taxi fares at a maximum rate and 5 imposed a minimum fare. Austria and Germany are the only two Member States that have fixed taxi fares in general, while some countries impose fixed fares for airport journeys.

Next steps

“First results indicate that regulation needs to be balanced to boost competition and innovation in the taxi and private hire car market. Pricing will be important, and whether there should be uniform pricing for the new joint hire car and taxi trade; a complex question to be resolved individually by the provincial governments. Regulation that is too strict might drive innovative digital companies from the market. But regulation that is too weak might threaten overall supply of the service,” explains Director General Theodor Thanner.

Whether there should be uniform pricing for the new joint hire car and taxi trade is a complex question that will need to be resolved individually by the provincial governments. If they decide to regulate taxi fares, the amendment to the GelverkG will give them less leeway for exemptions and the actual composition of fares. However, it is conceivable and possible that they could regulate without imposing fixed rates (e.g. by imposing a price range for the basic fee).

The sector inquiry is ongoing, and the AFCA also plans to conduct a customer survey to look into related consumer benefits.

The inquiry’s final report will also include an analysis of the potential impact of various different forms of pricing (minimum fares, maximum fares or fixed fares) on competition, on the companies, on the taxi and private hire car market, and on innovation, as well as on consumers.