Taxi industry inquiry
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- The inquiry’s methodology
The inquiry’s approachIn accordance with its Terms of Reference, the Taxi Industry Inquiry has adopted a strong focus on the performance of the taxi and hire car industry. Poor service performance, in particular, was a key reason for the inquiry being established. Concerns were also expressed about the adequacy of the industry’s performance in protecting the safety of taxi users and drivers. Accordingly, an important focus of the inquiry has been to understand what lies behind this poor industry performance. From the outset, the inquiry’s view has been that fundamental reform, as sought by the Victorian Government, is not possible without understanding the nature of the problems confronting the industry. Industrial organisation economists use a ‘Structure Conduct Performance’ framework to help to explain industry performance. This framework, which acts as an aid to analysis, has assisted the inquiry in its work. Put simply, the framework postulates that industry performance will be strongly influenced by the conduct of firms in the industry as well as by consumers and that, in turn, this conduct will be strongly affected by the structure of the industry. ‘Structure’ covers aspects such as the number, size and distribution of existing firms and the barriers to entry to the different market segments within the industry. Together, these elements have a significant influence on the competitive environment within an industry. The inquiry has found that the most important element of industry structure influencing the performance of the taxi and hire car industry is the government regulation specifically related to the industry. This industry-specific regulation has essentially determined the competitive environment, which in turn, has influenced business conduct and industry performance. Therefore, reform of regulation has become the core focus of the inquiry. In reviewing taxi and hire car industry regulation, the inquiry has been very mindful of applying the principles of best practice regulation agreed to by the Council of Australian Governments (COAG) and embodied in the Victorian Guide to Regulation.6 Under these principles, regulation needs to be justified on the basis that it provides net benefits to the community (where the benefits to all groups in the community outweigh the costs involved). Further to this is the notion that regulation should be used only when it is the best means of achieving the objectives sought that is, it provides the greatest net community benefits of all feasible policy alternatives, including non-intervention. Other aspects of good regulatory design include that the regulation is in proportion to the problem it addresses, particularly in respect to enforcement and compliance. Regulation should be flexible and allowance should be made for change. The inquiry has also maintained consistently that policy and regulation development should be open and transparent, and that the regulator should adopt a comprehensive engagement strategy. Good regulatory principles also require that regulation and its application are consistent and predictable. For too long, the regulation around taxis and hire cars has been a patchwork of ad hoc remedies that offers no coherent vision for the industry, let alone a clear path to achieving such a vision. The inquiry’s recommendations are designed to form an integrated package of reforms that will hold together as a single, consistent regulatory framework. The inquiry’s approach has also been guided by the view that, while regulators should encourage a cooperative compliance culture within the regulated industry (and this can be achieved through the involvement of the industry in the design of regulation), the growing importance of the market as a discipline in the taxi and hire car industry will act with greater surety than any imposed regulation. To this end, the inquiry’s recommendations aim to deliver a larger role for markets and competition within the industry and a bigger role for industry self-regulation. Alongside this core focus on regulatory reform, the following principles have guided the inquiry’s work: Public interests are at the forefront of the inquiry’s analysis and recommendations, particularly the interests of current and potential consumers of taxi and hire car services Regulations that are not necessary to protect the public interest should be removed to reduce the regulatory burden on the industry Reforms proposed by the inquiry should support an efficient, competitive and innovative industry Reform must be evidence-based and practically achievable within a reasonable timeframe.
The inquiry used a number of methods to develop a clear understanding of what Victorians need and want from taxi and hire car services, the unmet demand for these services and whether better and new services are being hindered by the current regulatory regime governing the industry. The structure of the inquiry’s Draft Report reflected the approach adopted by the inquiry in conducting its investigation: Understanding the current structure and operation of the industry (see Part B of the Draft Report) Identifying problems within the industry and exploring their underlying causes (Parts B and D) Examining the reform approaches adopted in other jurisdictions (Part C) Identifying the current regulatory framework and the role of the industry regulator, and analysing the case for regulation of the industry (Part C) Understanding the impact of regulation on the industry’s performance (Part D) Seeking the views of taxi customers and the broader community on what they want from taxi and hire car services, and canvassing industry views on how the industry’s performance can be improved (Part A) Identifying those aspects of the industry that should be regulated to improve performance and deliver services that meet customer and community demand, and recommending a strategy for reform to improve service and other outcomes (Part E). The inquiry drew on previous studies covering aspects of the taxi and hire car industry and commissioned original research in a number of areas: consumer attitudes to taxis and hire cars (Ipsos Social Research Institute), consumer detriment (Latitude Insights), demand for taxi and hire car services in Melbourne (The Hensher Group), driver status and driver-related issues (Hara Associates), taxi information systems (Rhumb Consulting) and overseas experiences with taxi and hire car regulation (Jaguar Consulting).7 The inquiry also conducted its own research and analysis, and undertook detailed modelling using data and information collected from the industry.8 The inquiry developed and implemented 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 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.9
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