The Competition Advocate

  • By the Competition Promotion Branch

Taxi industry’s emerging digital dispatch services

OTTAWA, November 25, 2014 — In recent years, the taxi industry has witnessed the emergence of innovative business models that make use of software applications to efficiently connect passengers with available drivers. These services, known as digital dispatch services, allow customers to use their smartphones to locate nearby drivers, conveniently order their services, and arrange payment.

The Competition Bureau is of the view that these innovative business models have the potential to offer important benefits to consumers through more competition, including lower prices, greater convenience and better service quality for a variety of reasons.

First, digital dispatch services offer an innovative and convenient alternative to traditional methods of arranging urban transportation, such as hailing a taxicab on the street or phoning a traditional dispatcher. This is very convenient for consumers.

In addition, many of the new emerging software applications offer additional features, including payment options and Global Positioning System technology to allow consumers to identify nearby available vehicles and tailor their requests accordingly. While early digital dispatch services generally connected passengers to licensed taxicab drivers, some applications are now facilitating “ride sharing” services that connect passengers to private drivers that wish to offer transport services. These innovative applications benefit consumers in the form of greater convenience and better service quality.

The Bureau is aware that many local municipalities have raised concerns that providers of digital dispatch services, as well as the drivers that use these services, may not be in compliance with local regulations and licensing requirements that govern transportation service providers. For example, the cities of Montreal, Calgary and Vancouver recently disallowed ridesharing services, and other municipalities including the cities of Ottawa and Toronto have taken enforcement action against providers of digital dispatch services. The Bureau believes municipalities should consider whether prohibitions on digital dispatch services and ridesharing applications are necessary and explore whether less restrictive regulations could adequately address their concerns.

In addition, many stakeholders have also raised concerns about consumer protection issues, including safety and privacy concerns. While the Bureau is not well-placed to assess safety concerns, which may well be legitimate, we are able to highlight to regulators what they give up in terms of reduced competition when these innovative offerings are prohibited. In addition, such regulations should be no broader than what is reasonably necessary to achieve consumer protection objectives.

Over the years, the Bureau has received numerous complaints concerning the taxi industry, including would-be drivers being unable to obtain plates, drivers being forced to deal exclusively with one dispatcher, and service complaints concerning wait times and prices.

The Bureau understands that innovation can be disruptive to existing industries. Recent examples include the real estate and banking industries. However, in order to be successful, not only must the innovators have courage, vision, drive and patience, but markets must be receptive to those efforts.

While urban transportation services that use passenger motor vehicles, including taxicabs, have traditionally been closely regulated by municipalities, the many concerns expressed by municipalities, stakeholders and consumers highlight the importance of ensuring that those responsible for the regulatory oversight over licensing and other relevant competitive factors properly consider the impact their rules and policies have on competition and ultimately, on the prices, choices, and service quality available to consumers.

For more information, please read the submission the Bureau made to the City of Toronto’s Taxicab Industry Review in February 2014.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

Quick facts

  • As part of its mandate, the Bureau participates in a wide range of activities to promote and advocate the benefits of a competitive marketplace, both in Canada and abroad.
  • Greater competition generally leads to lower prices for consumers, as well as more consumer choice, a wider range of service options and increased innovation.

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The Competition Advocate is published by the Competition Bureau’s Competition Promotion Branch. It is published periodically and offers the Bureau’s views on industries that may benefit from increased competition.

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