Taxi industry inquiry



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Executive summary


From the commencement to the conclusion of the Taxi Industry Inquiry  across the inquiry’s extensive 16-month investigation  one thing has remained clear and incontrovertible: Victorians want better taxi services. It is equally clear that the Victorian taxi industry is not delivering the levels of service quality, availability, accessibility and value expected by the community.

With the overall number of taxi trips remaining static, occupancy rates of taxi vehicles remaining low and taxi businesses facing increasing cost pressures, the effects of this poor performance continue to be felt by many in the industry, especially taxi operators and drivers.

Despite these well-documented problems, the taxi industry has done little to improve its performance, develop new services or take action to attract and retain high quality drivers. Instead, key elements within the industry have focused largely on maintaining high licence values and assignment fees, shielding anti-competitive forces within the industry and shoring up the position of licence holders, large fleet operators, taxi networks and other protected stakeholders.

As set out in the inquiry’s Draft Report Customers First: Service, Safety, Service, Choice the inquiry has found that the causes of the taxi industry’s poor performance are longstanding and deeply entrenched. Most of the industry’s problems stem from the complex and prescriptive regulatory framework within which it operates – a framework that constrains competition, stifles innovation and directs much of the revenue generated by the industry away from those providing ‘on the ground’ services.

Aside from a few limited instances of entrepreneurship, the industry has failed to take up opportunities to expand into new markets, establish new services or significantly improve existing services. Where businesses have attempted to be innovative, they have often been thwarted by regulatory barriers that restrict their ability to offer flexible and tailored services to customers. When these restrictions are combined with a situation where much of the revenue generated by the industry flows to licence holders, it is not hard to see why the industry is struggling.

The Taxi Industry Inquiry has devoted considerable energy, expertise and effort in endeavouring to find a solution to the moribund position in which the Victorian taxi industry now finds itself. The inquiry’s conclusion  set out in its Draft Report and repeated in this Final Report  is that comprehensive structural reform and a fundamental shift in the focus and balance of taxi and hire car regulation is the only way forward for the industry. Under the inquiry’s reform proposals, quantitative restrictions on the number of licences will be removed and replaced with price-based restrictions; regulation will become more outcomes-focused and less prescriptive; more responsibility will be placed on the industry for good service performance; and, most importantly, competition will be allowed to operate more effectively to enhance service performance and customer choice.

The inquiry’s strong view is that, without significant structural and regulatory reform, the industry will continue to stagnate, with increasingly poor outcomes for consumers and industry participants. Implementing the reforms recommended by the inquiry will ensure that, over time, Victoria’s taxi and hire car industry becomes more open, competitive, diverse and dynamic  offering consumers a wide range of high quality, affordable point-to-point travel choices and making a valuable contribution to the Victorian community and economy.

      The inquiry’s work


Commencing in May 2011, the inquiry’s investigation has included a comprehensive community engagement strategy to ensure that as many Victorians as possible had an opportunity to contribute their views on the future of taxi and hire car services. The strategy included seeking formal submissions from the Victorian community, distributing customer and industry surveys, conducting visits and consultations across the State, and hosting specialised forums for taxi drivers, hire car operators and mobility disadvantaged taxi users.

The inquiry conducted and commissioned research into the Victorian taxi and hire car industry and into the operation and reform of the industry in other places around the world. The inquiry also collected and analysed an unprecedented amount of data about the industry and undertook detailed modelling using this data. As well as the Draft Report, the inquiry released a major background paper, Setting the Scene, several issues papers and a number of technical reports. Active social media platforms were maintained for the duration of the inquiry.

In the first phase of its work, the inquiry received almost 400 submissions from the Victorian public. Following the release of the Draft Report in May 2012, the inquiry received a further 1,370 submissions, mostly from individuals. In the four months to the end of September 2012, the inquiry met directly with industry and other stakeholders to discuss their responses to the Draft Report, conducted hearings over two days in August and undertook additional analysis and modelling based on new data and information provided in submissions and responses. This further work informed the inquiry’s final recommendations and led to the inquiry amending or clarifying a number of draft recommendations, as well as making several new recommendations.

      The inquiry’s Draft Report


The inquiry’s Draft Report contained a comprehensive analysis of the taxi and hire car industry, and made 145 draft recommendations. These recommendations formed an integrated package of reforms that aimed to shift the structure of the industry towards a more open and competitive market with a higher number of owner-drivers and small and large businesses offering greater choice in services, vehicles and price.

Over time, the draft recommendations aimed to deliver the following outcomes:



For consumers – Better services and a greater choice of services that are safe, reliable and affordable, and that offer a bigger range of travel options and prices

For industry – A more diverse and dynamic industry, a reduction in the regulatory burden and new opportunities to expand into new markets and attract more customers

For taxi operators – More choice in the networks they join, the services and equipment they purchase and the types of service they provide

For drivers – Better remuneration and improved working conditions, greater valuing of driver experience and quality, and more opportunities to start their own taxi business.

The Draft Report noted that unduly prescriptive regulation had shaped the taxi industry over many years and was at the heart of the problems raised with the inquiry. While acknowledging an important role for regulation of the industry, the inquiry’s conclusion was that reform of the entire regulatory framework affecting taxis and hire cars was needed to achieve sustained improvement in service performance and secure the industry’s long term future.

The inquiry’s view was that further piecemeal regulation would not deal conclusively with the issues facing the taxi industry and would also reduce the chances of ever achieving substantive industry reform. Accordingly, the inquiry’s draft recommendations aimed to generate a fundamental shift in the balance between government, industry and market regulation. The main changes to regulation identified as necessary in the Draft Report were:

Changing the way entry to the taxi industry is regulated (moving to a restriction based on licence price, not the quantity of licences)

Stronger regulation covering driver and vehicle quality, including a move away from exploitative bailment arrangements for drivers and allowing greater freedom for operators to use better, safer and more accessible vehicles

A more effective outcomes-focused and informed regulator

Greater flexibility and certainty in fare setting to enable more efficient and competitive fares to be set

Removal of unnecessary regulatory impediments to service innovation and network competition

Enhanced responsibility and accountability of taxi networks for service performance to both consumers and operators.

Over time, the inquiry’s draft proposals aimed to lower barriers to entry, leading to a more diverse industry and encouraging a range of large and small service providers offering much greater choice and flexibility in services.




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