Taxi industry inquiry
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The new RH categoryWhile welcoming the draft recommendations aimed at dealing with the problem of touting, industry representatives did not think the inquiry had gone far enough in ensuring that concerns of widespread fraud under the SV classification would be addressed under the new PBO model. Specifically, SV sedan operators have been accused of undermining the licensing regime through deception and misrepresentation to customers, using the specialised licence to poach work from full licensees and jeopardising the safety of customers. Many operators have been quite open with the inquiry that a percentage of their work is conducted outside the terms of their licences. In some cases, such as the RH 25 years+ licence, vehicles are able to compete with MH vehicles at a fraction of the cost. Clearly, the regulatory regime here is not working. The hire car industry has attributed these problems to the poor identification of SV vehicles, an ineffective penalty regime and low prioritisation by VTD enforcement personnel. However, underlining these issues is the licensing classification that creates a number of loopholes. In its final recommendations, the inquiry is proposing a new registration scheme that will clearly distinguish PBOs from purpose-specific Registered Hire vehicles, as well as a public education campaign, more effective enforcement and a review of penalties. The inquiry considered a registration process for all SV and RH licences to assist in addressing these problems and in ‘separating out’ PBO licensed vehicles from other commercial passenger hire cars. Under this scheme, severe penalties would apply where a vehicle is registered to operate as a wedding or tour vehicle but is found operating as a commercially licensed vehicle (for example, operating on the CBD to Airport route). The inquiry also considered complete deregulation of the non-PBO hire car market. Such an approach would make it very clear to passengers that there is only one type of registered hire car licence – the PBO. For industry, those that wanted to work outside the wedding and tour industries would need to purchase a PBO licence. It would also make the enforcement task easier. Deregulation could be accompanied by industry-led initiatives such as a voluntary code of conduct or accreditation program. The inquiry acknowledges that under deregulation of these markets, definitions for unregulated activities (weddings and tours) would still need to be clearly understood by all parties. These definitions would then help to frame an area that is not subject to enforcement activity, as any vehicle would be allowed to operate in these markets. Operators who conduct business outside of these definitions would require a PBO licence. The inquiry met with the Wedding Car Association of Victoria (WCAV) and discussed the effects of these proposals on their members. While very supportive of reform of the SV and RH licence classifications, the WCAV preferred that some minimal regulation be maintained. The WCAV proposed that restricted hire vehicles be aligned to the following sectors: weddings, funerals, debutante balls and school formals.86 Under this proposal, RH licences would be set at $2,000, with the annual licence fee of $138 retained. The Association argued that the need to obtain police checks and vehicle RWCs through a regulated body ensures a level of consideration by the market entrant. It also suggested it would be beyond an industry-based organisation such as the WCAV to administer an accreditation-type program. While noting these concerns and proposals, the inquiry observes that the over-riding concern continues to be that vehicles are not being used properly under the current purpose-based classification system. A clear signal needs to be sent to the public that only vehicles of certain types should be used in a registered system, removing the ambiguity presented by modern sedan vehicles as to whether they hold full operating rights or wedding or tour conditions. The WCAV also made the point that stretched vehicles require some form of regulation under the new licensing proposals. While the majority of stretched vehicle work is in the wedding industry, the WCAV argued that some operators also pick up other work in the PBO market. The WCAV proposed a $6,000 limousine licence for vehicles that can carry in excess of six passengers providing they are not classified under the Bus Safety Act 2009. The argument has also been made in a number of operator submissions that stretched vehicles should be permitted to provide a greater variety of work than that defined by the SV and RH categories, but that they should not have to pay the full VHA/B/C fee for a licence. The argument put forward is that stretched vehicles do not operate like sedan vehicles and pose only limited competition to VHA/B/C sedans for airport transfers or major events. Operators gave different opinions on what they believed should be the price of a stretched vehicle licence with full operating rights, ranging from $5,000 to $20,000. The inquiry considers that the rationale for licensing and registration systems for PBOs should reflect the rationale for licensing of taxis in Victoria. As the inquiry has noted consistently, the purpose of regulating commercial passenger vehicles is to address the market failure (information asymmetry) that a customer has very little knowledge about the service they are purchasing when catching a taxi. This informational gap is greatest in the taxi rank and hail market where the ‘next cab off the rank’ is taken. Regulations therefore allow a level of control over who drives and operates the taxi and the safety of the vehicle. In the hire car market, these customer information gaps are lessened by the fact that customers pre-book the service. In the PBO and limousine markets, there are still sufficient concerns around information asymmetry to warrant a licensing regime. However, for certain vehicles namely off-road, motorcycles and tricycles the inquiry believes a registration system is the correct approach. The inquiry considers that a stronger rationale exists for licensing stretched vehicles. Vehicles of this type have had significant body work and, while proven roadworthy under the VicRoads roadworthiness test, concerns have been expressed about their age and internal support structures. The risk is heightened by the large number of passengers (similar to a small bus) that many of these vehicles can carry. A licensing system for stretched vehicles allows the regulator to maintain a level of control over the maintenance and repair of these vehicles for the safety of passengers. The inquiry has considered the views expressed by the industry and concluded that the regulator should continue to oversee certain non-PBO hire cars. Accordingly, the inquiry is recommending a vehicle-based registration system for two types of restricted purpose vehicle types and a licence option for stretched vehicles. Vehicles that do not fit into one of these two Registered Hire (RH) categories, unless conducting wedding or tour work, will be required to purchase a PBO licence, which will give them full operating rights. The vehicles included under the RH model are: Motorcycles and tricycles (RH Motorcycles) Vehicles with special off-road features (RH4WD). The fee for entry to the registration scheme will be set at the administrative cost to the regulator ($1,500 GST exclusive), with annual payments set at prices more appropriate to the operating costs of the enforcement task. Under this model, vehicles used for weddings and tours will no longer be subject to licensing or registration requirements as small commercial passenger vehicles and will not be regulated by the Taxi Services Commission. Vehicles used for tours may be subject to regulation under the Bus Safety Act 2009 and Bus Services Act 1995. Vehicles used to provide non-wedding or non-tour services will need to fit into one of the RH categories listed above or be licensed as PBOs or stretched vehicles. Removal of these types of services from taxi and hire car regulation will ensure that operators wishing to provide a competitive service to taxis will need to purchase a PBO licence. RH 25 years+ licence holders should be permitted to continue operating the licence for the life of the current vehicle; however, no new RH 25 year+ licences should be issued. The reform of the non-PBO market should allow the TSC to clarify the definition of ‘tour’ to remove any uncertainty around how this deregulated sector will operate. This could be done by designating certain tourist attractions across Victoria (as done in the bus sector) as constituting ‘tours’. This would make it clear to businesses what is and is not a ‘tour’ and therefore not regulated. For example, the tourist attraction of Port Phillip Bay / fairy penguin watching would be a designated ‘tour attraction’, whereas events such as the Spring Racing Carnival and the AFL Grand Final would not be designated (as work relating to these events should be solely undertaken by the PBO and taxi markets). The inquiry is recommending the introduction of a stretched hire car vehicle licence, which will be available for $15,000 (GST exclusive) in the Metropolitan zone and $10,000 (GST exclusive) outside this zone. This licence will entitle the holder to operate their vehicle anywhere in their designated zone, except at airports. Stretched vehicles that choose to operate at airports will need to purchase a more expensive PBO licence. The inquiry considers that these changes to the hire car industry will help to more clearly identify those operators working illegally. Under these proposals, only vehicles with a clearly marked sticker on their windscreen and number plate identification will be able to operate from Melbourne Airport (unless for a wedding or package tour). The industry has emphasised very strongly to the inquiry that the licensing system is confusing and difficult to enforce, with claims of touting aimed squarely at SV sedan vehicles. The problem clearly lies in regulation that permits purpose-based licensing at a fraction of the cost of a full licence. Addressing these problems appears to require the complete reform of licence classification, as proposed by the inquiry. The case for more consolidated licences has been debated in the past. The view of many SV and RH licence owners has been that it would penalise service providers who want to provide a high quality vehicle, but who do not require the broad rights applicable under hire car operations and therefore do not want to pay higher licence costs. In past reviews of the industry, tour and wedding operators have seen such suggestions as an impediment to the growth of their businesses. However, the nature of the wedding car and tour segments does not justify a heavy handed approach to regulation. Vehicles are pre-booked, often months in advance, and there is a well-established online environment through which customers provide extensive feedback on service. The inquiry considers that there is scope for the WCAV in particular to play an enhanced role in industry self-regulation, either through a code of practice, an accreditation scheme or some other arrangement.
The inquiry’s proposals will potentially create a new market opportunity for PBO licence holders at Melbourne Airport, while at the same time addressing the serious problem of touting. If implemented, these reforms will allow customers to organise a PBO from a kiosk located inside the airport terminal. Once booked, passengers can be directed to a designated pick up zone, where a vehicle will be waiting. The inquiry has considered the comments and suggestions made in submissions in relation to this proposal. Foremost, it is clear that such a kiosk must be well managed to be successful and to avoid introducing more hire car vehicles and drivers into the airport’s forecourt area. Infrastructure will be a critical component, with space made available for a desk and a waiting zone for passengers, and the ability for the kiosk operator to communicate directly with cars stationed away from the terminal area. A well-managed PBO kiosk could communicate directly with drivers in an off-site car park and quickly bring vehicles to waiting passengers. The inquiry’s view is that such a kiosk has the potential to reduce touting, as it will be more apparent that drivers ‘hanging around’ the airport terminals do not have legitimate bookings. The inquiry also recognises the importance of a competitive and accountable kiosk system. If a kiosk is run by one network of hire car operators, it is unlikely that consumers will receive the best service fee offering. Rather, the kiosk should capitalise on the fact it is the end point for a number of journeys and that hire cars are more likely to take a lower cost fee than return to base. A competitively based bidding system would ensure the best price for customers. The inquiry notes that mobile-to-mobile bidding systems are already being used in the industry with great success. The inquiry considers that any tender based project offered by airport terminal operators to run a kiosk should consider having more than one operator network to provide services.
The inquiry agrees that touting is a problem that must be tackled and has recommended giving the TSC adequate powers to deal with touts and a review of penalties for touting. However, tougher penalties will be largely meaningless without effective enforcement action by the TSC and greater public awareness of the new PBO market conditions. As noted in the Draft Report, the inquiry found few infringement notices were issued to the hire car industry the result of difficulty in identifying offending vehicles, but also possibly due to a lower priority being given to tackling this problem. The inquiry’s view is that its hire car licensing recommendations and its broader recommendations around better vehicle identification, along with a risk-based approach to enforcement, will assist in reducing touting. However, the inquiry still expects the TSC to adopt a much tougher enforcement approach, particularly around venues where PBOs may be touting for the custom of rank and hail passengers. To further enhance compliance within the new PBO regime, the inquiry is making an additional recommendation to enhance public education around how to book, identify and provide feedback on PBO vehicles. The inquiry also notes the suggestion by TISV for the industry to fund full time, on-site policing by the regulator at Melbourne Airport. More broadly, as noted in chapter 11, the inquiry considers that industry funding of the Taxi Services Commission has significant merit.
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