This presentation by Damien GERADIN, Partner, EUCLID Law, was made during the discussion “Taxi, ride-sourcing and ride-sharing services” held at the 65th meeting of the OECD Working Party No. 2 on Competition and Regulation on 4 June 2018. More papers and presentations on the topic can be found out at http://oe.cd/2gs.

1. Taxi, ride-sourcing and ride-sharing services
Best Practice Roundtables on Competition Policy
OECD
4 June 2018
Prof. Dr. Damien Geradin

2. SUPPLY AND DEMAND
Under-supply
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3. SUPPLY AND DEMAND
Over-supply
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4. SOLUTION?
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5. STRENGTHS OF THE RIDE-SOURCING BUSINESS MODEL
• Ride-sourcing platforms considerably reduce search costs for drivers
and passengers.
• During periods when available cars are scarce (e.g., Friday and
Saturday nights), ride-sourcing platforms can incentivize drivers to
take the road by increasing their fees (a process referred to as
“dynamic” or “surge” pricing).
• Ride-sourcing platforms efficiently match riders with the closest
drivers.
• Passengers can rate drivers, which gives them an incentive to perform.
• All rides are electronically traceable.
• Ride-sourcing platforms do not prevent riders and drivers to multi-
home.
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6. Competing Platforms
Around the World

7. REACTION IN EUROPE AND OTHER PARTS OF THE WORLD
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8. ARE RIDE-SOURCING PLATFORMS ANOTHER FORM OF TAXI SERVICE ?
• Ride-sourcing platforms are not taxi companies. They do not own cars
and do not employ drivers.
• Ride-sourcing platforms are analogous to the dispatch services that
have for a long time existed in the taxi industry where some
companies not only provide taxi services, but also dispatch rides to
independent taxis against the payment of a fee.
‒ But the difference is that ride-sourcing platforms are using an online platform
rather than a call centre.
• Nothing prevents taxi companies to develop their own platform or to
use third-party platforms available on the market, and many taxi
companies are now using their own app.
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9. DO RIDE-SOURCING PLATFORMS HURT TAXI COMPANIES
TAKING AWAY THEIR BUSINESS AWAY ?
• While the drivers using ride-sourcing platforms compete with taxi drivers for
riders, this competition is not a “zero-sum” game where each rider using a ride-
sourcing platform would be taken away from the taxi companies.
• Ride-sourcing platforms grow the market:
‒ Rides intermediated by ride-sourcing platforms are generally cheaper than those provided by
taxis
‒ Because of the set number of licensed taxis, there may be periods of the day or circumstances
where demand for rides exceeds the supply offered by taxis .
‒ Some cities have also been chronically undersupplied for many years due to the insufficient
number of licenses with the result that such licenses are traded for very large sums of money.
‒ Data shows that drivers using ride-sourcing platforms tend to better cover areas that are
traditionally underserved by taxis and other modes of transportation, which tend to
concentrate on urban centres
‒ Ride-sourcing platforms offer several advantages compared to taxi services, such as the fact
that they do not require cash payments, tips are not expected, safety is enhanced by the fact
that the identity of the driver is known and that the rides are traceable electronically. 8

10. TOTAL REVENUE IN POINT-TO-POINT TRANSPORT MARKET IN LOS
ANGELES
Deloitte Access Economics (2016) 9

11. DO RIDE-SOURCING PLATFORMS NEED TO BE REGULATED LIKE
TAXI COMPANIES TO PREVENT “UNFAIR COMPETITION”?
• While it seems fair that businesses offering similar services should be
subject to similar rules, the relevant questions here are:
‒ Whether ride-sourcing platforms and taxi companies offer similar services and,
if not,
‒ Whether the regulatory requirements applying to taxis should be extended to
ride-sourcing platforms?
‒ The answer is no because:
‒ Regulations that apply to taxis (caps on number of taxis, price controls,
etc.) were developed at a time where the technology used for online
intermediation services did not exist
‒ The application of taxi regulations to ride-sourcing platforms would
eliminate most of the key efficiencies brought by such platforms
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12. FAILURES OF MOST EXISTING TAXI REGULATORY REGIMES
• Capping the number of licenses was historically based on the fear of
“ruinous competition”.
• But it has created a system leading to a misallocation of resources:
‒ There is under-supply at certain times of the day and in certain locations.
‒ There is over-supply at certain times of the day and in certain locations.
• The current business model of taxi companies makes little sense.
‒ Because licenses are scarce, licensed taxis operate on a full-time basis.
‒ Taxi drivers stay idle a large part of the day and because of price controls,
there is no way to stimulate supply / reduce demand.
‒ Busy periods and profitable rides cross-subsidize down periods and
unprofitable rides.
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13. THE NEED FOR A REGULATORY SOLUTION
• The best approach is to adapt the regulatory framework to allow
competition between taxi companies and ride-sourcing platforms
such as Uber or Lyft.
• The regulatory framework should be reassessed to:
‒ Be competitively neutral (no category of service should be privileged).
‒ Eliminate provisions that are no longer necessary due to competition or that
prevent efficient behaviour.
‒ Price regulation may no longer be necessary once there is more competition in the market.
It may also prevent efficient conduct, such as « surge pricing » during peak hours.
‒ Quality regulation may no longer be needed either as rating system gives incentives to
drivers to provide good service.
‒ Regulate market failures (see Edelman & Geradin, 2015).
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14. ADDITIONAL ISSUES?
• One or two regimes?
‒ Finland went for the first option, other European countries for the
latter.
• Regulating the platform or its users?
‒ This should depend on the issues.
• How can one make regulation future proof?
‒ Self-driving cars are around the corner …
• What should be the role of competition authorities?
‒ The importance of advocacy.
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15. CONCLUSIONS
• Ride-sourcing platforms have introduced dynamism in a
typically static sector.
• Because they provide an innovative service that is attractive
to users, ride-sourcing platforms should be allowed to
compete legally.
• The question is of course which regulatory framework should
apply to ride-sourcing platforms.
‒ Requirements that are needed to protect users (insurance, safety,
etc.) should apply.
‒ Barriers to entry and other unnecessary regulation should be
removed.
 The focus should be on market failures. 14