Metered Taxis and E-Hailing Services Report
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MARKET INQUIRY INTO LAND BASED PUBLIC PASSENGER TRANSPORT METERED TAXIS AND E-HAILING SERVICES REPORT NON-CONFIDENTIAL VERSION 19 February 2020 i Table of Contents List of tables ......................................................................................................................... i List of figures ....................................................................................................................... i EXECUTIVE SUMMARY ..................................................................................................... iii 1. Market Inquiry background ......................................................................................... 1 2. Background to the metered taxi industry and e-hailing services ............................. 5 3. Overview of the regulatory framework ..................................................................... 15 4. Price setting mechanism ........................................................................................... 29 5. Barriers to Entry ......................................................................................................... 40 6. Competition assessment ........................................................................................... 43 7. Other emerging issues .............................................................................................. 56 8. Findings ...................................................................................................................... 63 9. Recommendations ..................................................................................................... 64 ANNEXURE A – List of stakeholders that made submissions to the market inquiry .. 66 List of tables Table 1: Number of e-hailing operators with or without valid operating licences as at September 2019 26 Table 2: Price differences between Uber and metered taxis 36 Table 3: Uber and Bolt market shares (number of trips) from 2016 to 2019 43 Table 4: Gross and net earnings for trips less than 2 km (June 2013 to October 2018) 58 List of figures Figure 1:Application process 20 Figure 2: Trips subject to dynamic pricing in Cape Town and Johannesburg 33 Figure 3: Practical illustration of dynamic pricing on Ed Sheeran Concert 34 Figure 4: Illustration of dynamic pricing during the Global Citizen Concert 34 Figure 5: Time spent by a selected operator without a trip 60 i List of Abbreviations 4IR or Industry 4.0 Fourth industrial revolution ACCC Australian Competition and Consumer Commission CADE Administrative Council for Economic Defense, Brazil CJEU Court of Justice of the European Union DOT National Department of Transport EPH Earnings per hour ERTB Economic Regulation of Transport Bill GPS Global positioning system IPTNs Integrated Public Transport Networks IPTNP Integrated Provincial Transport Network Plans ITPs Integrated Transport Plans MEC Member of Provincial Executive Committee MRE Municipal regulatory entity NLTA National Land Transport Act, 2009 (Act No. 5 of 2009) NLTTA National Land Transport Transition Act, 2000 (Act No. 22 of 2000) NLTIS National Land Transport Information System NTA National Taxi Alliance OECD Organisation for Economic Co-operation and Development PRE Provincial regulatory entity PTSAP Public Transport Strategy and Action Plan SAA South African Airways SABOA South African Bus Operators Association SAMTA South African Metered Taxi Association SANTACO South African National Taxi Council TAT Transport Appeal Tribunal ToR Terms of reference ii EXECUTIVE SUMMARY 1. On 10 May 2017, the Competition Commission (the Commission), in its exercise of its powers under section 43B1 of the Competition Act, 1998 (Act No. 89 of 1998) (the Act), published a notice that it would conduct a Market Inquiry into land based public passenger transport sector (the Market Inquiry). The Terms of Reference (ToRs) for the Market Inquiry were also gazetted on the same day. The ToRs identified the centrality of public transport in providing meaningful mobility for most of the population in pursuit of economic participation. The Commission has limited its inquiry to the public passenger transport sector, comprising road and rail based public passenger transport, as relevant for this Market Inquiry. 2. The Inquiry was initiated because the Commission was of the view that there are features or a combination of features in the public passenger transport sector that were distorting or inhibiting competition. The Commission made this assessment based on several complaints in the industry as well as complaints lodged with the Commission by some stakeholders. In addition, transport in general is one of the priority sectors of the Commission. South Africans spend a high proportion of disposable income on public transport (over 20 per cent) against the world benchmark (of 10 per cent) and therefore any resolution on identified impediments in the sector was envisaged to have benefits in the long run. 3. The ToRs identified the central role of public transport in providing meaningful mobility for most of the population in pursuit of economic participation. The ToRs identified the following broad themes to be investigated as part of the Inquiry: 3.1 Price setting mechanisms: Analysing different price setting mechanisms for all modes of public transport and their impact on competition; 3.2 Price regulation: Examining applicable price regulations and their impact on competition; 1 Section 43B of the Competition Act which relates to initiation of market inquiries states: “(1) The Competition Commission, acting within its functions set out in section 21(1), and on its own initiative, or in response to a request from the Minister, may conduct a market inquiry at any time, subject to subsections (2) to (4)- (i) if it has reason to believe that any feature or combination of features of a market for any goods or services prevents, distorts or restricts competition within that market; or (ii) to achieve the purposes of this Act.” iii 3.3 Route allocation, licensing and entry regulations: Assessing the impact of regulations, including route allocation, licensing and entry requirements on intermodal and intramodal competition; 3.4 Allocation of operational subsidies: Assessing the impact of operational subsidies on some modes of public transport and their impact on both intramodal and intermodal competition; 3.5 Transport planning: Evaluating the impact of the government’s transport planning framework on dynamism, efficiency and competition; and 3.6 Transformation: Assessing transformation issues, including ownership patterns in the public transport industry. 4. Following the publication of the ToRs, the Commission published the Stakeholder Participation Guidelines (the Guidelines) and Call for Submissions on 13 July 2017. The Commission also held public hearings across the 9 provinces between June 2018 and August 2018. Oral and written submissions were received from over 200 stakeholders. All submissions and transcripts of public hearings are available on the Commission’s website (http://www.compcom.co.za/public-passenger-transport-market-inquiry/) Rationale of subdividing the report 5. This report has a specific focus on e-hailing and metered taxi services while the main report will focus on traditional markets which are largely static in nature (i.e. minibus, bus and rail). 6. The Commission is of the view that the dynamics of competition between the metered taxis and e-hailing services are driven largely by technological developments. The innovation and digitisation of the markets are referred to as the fourth industrial revolution (4IR or Industry 4.0). Competition assessment and regulatory scrutiny in these evolving technology or platform markets require special attention given their dynamic nature. This report therefore focuses on the dynamic nature of competition in these evolving technology markets while the main report focuses on the traditional markets which are largely static in nature (i.e. minibus, bus and rail). The Commission is not in any way downplaying some technological developments in the traditional markets, but the innovations do not disrupt the way the industry generally operates on a broader level. For example, in several countries, no regulations exist to cater for e-hailing services. In South Africa, the iv Department of Transport (DOT) issued a practice note to assist provincial regulatory entities (PREs) to deal with the licensing process of e-hailing operators while the amendments to legislation are being considered. For ease of reference, we refer to them as e-hailing operators. 7. Given the dynamic nature of these markets, the Commission analysed the impact of regulations on competition, i.e., do regulations (or lack thereof) inhibit or distort competition in the metered taxi and e-hailing service markets? The ultimate objective is to promote competitiveness and efficiency in this market, as well as to encourage the industry to explore new and innovative ways of operating. 8. This report provides the provisional findings and recommendations of the Commission. More broadly, the Commission invites stakeholders to make further submissions and provide comments on both the findings and recommendations in this report by 31 March 2020. This deadline for submissions will be strictly enforced in order to ensure that the Market Inquiry is finalised timeously. Submissions can be made electronically and sent to the following address: [email protected] Evolution of the metered taxi industry 9. The metered taxis