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Priorities of competition enforcement on the taxi markets

The FCCA intervenes with practices of companies in the taxi industry that have adverse effects on consumers, restrict competition and prevent the market from opening up. These practices include

It is the responsibility of each company to assess whether their activities comply with the Competition Act. The Finnish Competition and Consumer Authority (FCCA) does not have the authority to approve practices between companies in advance. Instead, the FCCA intervenes with competition restrictions based on a retrospective assessment.

The purpose of the Competition Act is not to prevent new innovative and consumer-friendly services from entering the market. The FCCA offers companies advice on what issues should be taken into account when implementing services.

The authority continues to receive a large number of contacts regarding various procedures in the taxi sector. The FCCA cannot comment on all issues and cannot investigate all the individual procedures raised. The authority hopes that the contacts will be made primarily through the FCCA’s tip-off tool. The authority does not respond to all inquiries received and not all of them lead to an investigation.

Cooperation between competing companies

Taxi drivers who are independent entrepreneurs are in competition with each other, whether or not they belong to the same dispatch service company. Cooperation that restricts competition within an individual dispatch service company’s area is less harmful to the entire market if several taxi dispatch centres operate in the market and the competition between them is effective. The FCCA takes this aspect into account, especially when deciding which cases should be investigated in detail. Independent taxi entrepreneurs, or companies with their own drivers as employees, form a single company and regulations on cooperation between competitors do not affect their internal operations.

The Competition Act prohibits such practices between competing companies that are intended to restrict competition or as a result of which competition becomes restricted. For example, competitors may not agree on prices or participate in other forms of price fixing, divide markets or agree on collusive tendering practices. Practices that are prohibited include for example agreeing on prices, market-sharing and collusive tendering.

Cooperation that restricts competition may be allowed if it generates more benefits than harm to consumers. In such cases, the cooperation must be vital for achieving the benefits.

The FCCA always assesses the effects cooperation has on competition retrospectively on a case-by-case basis in accordance with the framework presented below:

Examples of forbidden cooperation and its assessment

Cooperation between dispatch service providers that restricts competition is generally always forbidden. In exceptional cases, it may be allowed if the companies can prove that the cooperation is beneficial and necessary for consumers.

Joint tenders. Competing taxi operators or dispatch centres are not allowed to submit a joint tender if they could have submitted separate tenders without cooperation.  If the companies could have submitted independent tenders, cooperation may only be allowed if the companies can prove that consumers benefit from the cooperation and cooperation is essential to achieve this benefit.

Price fixing between competitors. Determining a fixed price or a minimum price between competitors is generally always forbidden.

Setting a maximum price is also considered price fixing and is generally forbidden between competitors. Setting a maximum price may be allowed in exceptional cases, if the companies can prove that

  • the maximum price benefits consumers and the cooperation is necessary to achieve this benefit; this can be the case in some situations in which consumers book taxis over the telephone or using an application, for example
  • it is genuinely possible for each taxi operator to offer services at a price that is lower than the maximum price
  • the maximum price does not cause the prices of competing companies to become fixed in practice in a way that is disadvantageous to consumers

In the assessment, it must be taken into account that consumers may have a justified expectation that a maximum price applies to all rides offered under the same trademark. In principle, the potential consumer benefit gained from maximum pricing requires that the maximum price applies to all rides offered under the same trademark.

When competing taxi operators set a maximum fare within a dispatch centre’s area, it must be ensured that taxi companies or taxi entrepreneurs that operate within that area are not subject to further restrictions that are not necessary for gaining consumer benefit or which may result in a fixed price between competitors. Independent taxi entrepreneurs that operate within a dispatch centre’s area must have a genuine opportunity to compete with the dispatch centre and other companies by means of undercutting the set maximum price and by offering rides under competing brands. As a result, several companies using the same dispatch centre may set their own maximum prices, provided that the efficiency defence of maximum pricing is fulfilled for each price fixing arrangement.

Taxi operators agree on driving shifts. In principle, agreements on driving shifts between competing taxi operators are classified as prohibited cartel activities. This is the starting point, even if driving shifts are voluntary, not monitored or sanctioned. Agreements on driving shifts can only be allowed in very exceptional cases, for example, during quiet times of the day and, if companies can prove that it benefits consumers and is necessary. This may be the case, for example, if there are not enough cars available without this cooperation and if every driver has the opportunity to get a fare, even if they are not scheduled to be on a shift. It is unlikely that 24 / 7 driving shifts covering all days and times of the day would be necessary to produce efficiency benefits that also benefit consumers.

Companies participating in driving shifts must ensure that, at the same time, no restrictions other than those strictly necessary are imposed in order to achieve efficiencies that benefit consumers. Primarily, driving shifts must be limited to the times necessary to achieve the benefit. Driving shifts must cease if they are no longer necessary, for example, when a new operator enters the market. In addition, drivers belonging to a driving shift system must have the right to drive and the opportunity to obtain fares outside the driving shift.

Agreements on waiting and pick up locations may lead to a geographic partitioning of the market which can be as detrimental to the consumer as price fixing. Agreements on waiting and pick up locations or other regional divisions may only be permitted in very exceptional cases, if, for example, companies can demonstrate that there is not enough supply in a certain area without cooperation. Similarly to driving shifts, cooperation on waiting and pick up locations must be limited only to the geographical areas and to the time of day that is necessary to achieve efficiency that benefits consumers.

Discrimination or prioritisation in dispatch services based on driving shifts or waiting and pick up locations. Discrimination or prioritisation in dispatch services means, for example, arrangements in which available rides are offered to off-duty drivers, or to drivers of certain geographical areas after several minutes delay,. Offering rides primarily to certain taxi operators on duty or who operate in a given on-call area highlights the anti-competitive effects of shifts and waiting and pick up locations in a way that is not beneficial to consumers. Booking rides on a shift or area basis may reduce the incentive for other drivers to provide services outside of shifts or waiting and pick up locations.

Restricting access to dispatch services. A practice in which a dispatch centre owned by competing taxi operators sets a certain maximum number of taxi operators or cars to be included within the scope of the dispatch centre, or requires a needs assessment before adding new taxi operators or cars to the service may lead to output restriction comparable to market-sharing arrangements, or to exclusion of competitors. In practice, the conduct may prevent new taxi operators from operating in the dispatch centre’s area. In principle, new operators may be refused only if there are objective grounds for refusal which apply equally to all taxi operators. When assessing the acceptability of a restriction, the FCCA will take into account the competitive conditions prevailing in that market, such as the number and market position of competing dispatch centres.

Restricting drivers from receiving fares from other dispatch centres or ride booking applications may have anti-competitive effects. In practice, the restrictions may weaken the operating conditions of taxi operators or other dispatch centres in the area. This can reduce competition on price and quality in the area and therefore harm consumers. The restrictions are particularly problematic if the dispatch centre is in a dominant position.

In addition to the examples described above, there are other practices that may be classified as prohibited cooperation between competing companies. The FCCA monitors market developments and, if necessary, adds new examples of practices to the list.

When evaluating the above examples, it is important to pay attention to the combined effect of different practices. Imposing a number of separate restrictions is likely to have more anti-competitive consequences. Where a dispatch centre has a dominant position, it has an increased obligation to ensure that it does not impede competition in the market.

Abuse of a dominant position

A dispatch centre or other taxi service company may be in a dominant market position if its position on the market is so strong that it can operate independent of competitors. Market dominance itself is not forbidden but abusing it is. The following aspects are taken into account when assessing market dominance

  • How big is the dispatch centre’s or taxi service company’s market share and how has it developed? A particularly large market share (over 50%) creates a refutable presumption of a dominant market position, but a company with a smaller market share may also be in a dominant position.
  • Are there other dispatch or taxi service companies operating in the area and how big is their market share?
  • Is the dispatch centre or taxi service company the only one in the area to cover taxi services reimbursed by Kela?
  • What other factors reassert the dispatch centre’s or taxi service company’s position in the market?

Dominant dispatch centres have a to ensure that they do not hinder competition

  • Dominant dispatch centres have an obligation to include all taxi operators under their dispatch services, unless they can prove that there is an objectively justified reason to refuse some drivers.
  • Dominant dispatch centres should distribute Kela reimbursed taxi transport to all taxi operators using objective criteria.
  • Dominant dispatch centres may not directly or indirectly limit the possibilities of companies operating within its scope to take transport requests from other dispatch centres.

How will the FCCA intervene with detected problems?

The FCCA investigates the taxi service market both on its own initiative and on the basis of requests for action. Measures taken by the FCCA are determined based on the severity and harmfulness of the company’s practices.

  • Shortcomings are corrected using commitments suggested by operators.
  • The FCCA may require a practice to be stopped completely. If a forbidden practice is continued the FCCA will take the case to Market Court.
  • In cases involving serious violations of the Competition Act, the FCCA will present the Market Court with a penalty payment proposal.

The FCCA’s tasks and powers do not include resolving disputes between a dispatch centre and an individual taxi operator or intervening in practices that do not affect the functioning of competition in the market in general, even if the situation is problematic for an independent taxi entrepreneur.

Contacts regarding  competition policy enforcement on the taxi service market

Director Valtteri Virtanen, tel. +358 29 505 3621,
Senior Specialist Eero Hämäläinen, tel. +358 29 505 3033,
email address firstname.lastname@kkv.fi.