Organization: OECD (Organization for Economic Co-operation and Development, Paris, France) report on global issues:  

Report: Taxi Services: Competition and Regulation 2007

Link: Taxi Services: Competition and Regulation 2007 

Synopsis from the Report:

Introduction:

This document includes … written submissions from Belgium, the Czech Republic, Denmark, France, Germany, Hungary, Indonesia, Ireland, Italy, Japan, Korea, the Netherlands, Norway, Romania, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

Overview:

Taxi services are subject to a variety of potential limitations of competition that most notably include entry restrictions in many jurisdictions. Such restrictions can take the form of clear overall limits on the number of licenses available for taxi driving or can involve rules that call for excessively high quality of cars or driver training. Such rules restrict the total number of suppliers and typically lead to an undersupply of services. In general, the value of such entry restrictions is converted into the value of licenses, rather than the earnings of a driver who rents their cab.

A further common focus of government oversight of the taxi sector includes price regulation. Pricing oversight may exist[s] to prevent price gouging when drivers pick up customers on the street and the drivers have market power owing to an absence of other drivers. Another reason for pricing rules is to protect uninformed customers, such as with tourists, who might not be aware of pricing alternatives. At times, new professions have been introduced to increase the supply of certain services (like booking cars in advance).

EXECUTIVE SUMMARY By the Secretariat (from pages 7 – 10)

(1) Restricting the number of taxis

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.

(2) Taxi reform and equity issues

Although entry restrictions are often justified on equity grounds there is no evidence that drivers fare better in restricted markets. On the other hand, higher prices and lower availability disproportionately affect low income consumers of taxi services.

(3) Recent reforms to taxi regulation

Increasing numbers of OECD countries have removed or loosened supply restrictions on taxis. The results of these reforms have been strongly positive, with reduced waiting times, increased consumer satisfaction and, in many cases, falling prices being observed.

(4) Choosing among reform strategies

In highly restricted taxi markets, immediate implementation of an open entry policy is likely to be politically challenging. However, adopting staged approaches delays the achievement of reform benefits and poses major practical risks that reform will be stalled or reversed. Immediate reforms have been completed successfully in some highly restricted markets.

(5) Quantity vs. quality regulation

Removing entry restrictions does not imply removing quality based regulation. Indeed, supportive regulation is a precondition for fully achieving the potential benefits of adopting an open entry policy. That said, remaining regulatory arrangements must not unduly inhibit the development of innovative service offers and industry models.