Seminar 1: Creating Markets – Local Transport (2 October 2014)

For this seminar I would like you to look at the newspaper debates surrounding ‘Uber’ and a recent paper from the Law Commission of England & Wales that looks at opening the taxi market in the UK. Both are instances of a regulated market (why is it regulated) being challenged by a new entrant.

On ‘Uber’ and related matters, please have a look at news coverage (some recent articles in the Financial Times at the end of August/start of September, to which you have free on line access!); it would be useful if you could all try and find coverage from local media in your country so we can perhaps identify differences in the way the issue is perceived.

Readings
Eskenazi ‘The French Taxi Case: Where Competition Meets—and Overrides—Regulation’ (2014) Journal of European Competition Law and Practice (online)

Law Commission, Taxi and Private Hire Services. Look for example at chapters 1 and 11 of the final report. Documents are her: http://lawcommission.justice.gov.uk/publications/2717.htm

Issues for Discussion

Why is the taxi market regulated?

How does regulation affect competition?

In identifying regulatory objectives, how high should competition rank?

What are the problems of having a competitive market that is regulated? Having identified the problems, how do you think they are best addressed?

How does/should the presence of regulation in a market affect the application of competition law? (Note, most markets are regulated in one way or another.)

A more legalistic question: if laws harm human rights, there are means of challenging them; are there means of challenging laws that have anticompetitive effects? If not, why not?

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17 comments on “Seminar 1: Creating Markets – Local Transport (2 October 2014)

  1. http://www.berlin.de/sen/justiz/gerichte/vg/presse/archiv/20140926.1255.399438.html / http://recode.net/2014/09/26/german-courts-uphold-ban-on-uber-ride-share-service/ / https://twitter.com/windrush/status/476755835801333760 / http://jeclap.oxfordjournals.org/content/early/2014/07/21/jeclap.lpu065.abstract

    Taxi market is regulated on one hand because it is thought to protect consumers (f.e. in Germany, many places a ‘license’ of sorts is required.) and because it is thought to protect (or at least that is sometimes said) Taxi drivers from too harsh competition (though I think in practice this is debateable) and to provide a fixed price for consumers. Compared to Uber, which f.e. pays drivers differently, but f.e. also raises prices when cars are much more in demand, so in a way a model of classic competition theory.
    Regulation provides a barrier to entry and is supposed to fix prices, for the good of drivers and passengers alike. This means that no one can just enter the market (whether it’s a company or a single driver) and this in return prevents ‘normal’ competition. I would say competition is very important, but in some instances has to be weighed against the public good or other public objectives.
    How regulation affects the application of competition law depends on the regulation at hand. Anticompetitive effects are not seen on the same level as human rights, though there have been some cases where legal entities/companies qualified, to a degree, as person with similar rights. In most cases, laws with ‘anticompetitive effect’ will be in place because the legislator weighed another good higher than just letting competition runs its course. As such, like most laws, they can’t just be challenged because they have the effect they are supposed to have. (unless against fundamental right or similar)

    See also: Markets in everything through freely tradeable licenses, either often privately sold (France) (also to some degree degrading the protection aspect) or sold or inherited (Greek Lorries or Taxis)

  2. giorgiomonti says:

    and a couple more interesting links a colleague of yours has sent in.

    http://taxifacts.com
    This one is one of the many on line lobby websites.

    http://competitionpolicyreview.gov.au/files/2014/09/Competition-policy-review-draft-report.pdf
    This one has a bit on Uber too, but it is also a fascinating document in its own right, to which we may return. In brief, in teh 1990s Australia launched a national competition policy, designed to check for the anticompetitive effects of all legislation. This is a follow up study on the state of competition in Australia. Look at chapter 22 for discussion of the wider context.

  3. Christopher Johnson says:

    Prior to the Industrial Revolution, textile working in the United Kingdom had been a highly skilled cottage industry. The early 19th century saw the development of mechanical frames and looms. This new machinery could be operated by unskilled workers and was capable of producing textile products at a significantly higher rate than had previously been possible. In response to this new competition, artisan textile workers joined together to protest; a movement known as the Luddites.

    Technological advance often leads to new, highly competitive firms entering an established market. The benefits of such increased competition are wide ranging and should not be constrained without good reason.

    In the context of the taxicab market, if smartphone based applications such as Uber and Lyft are able to satisfy the stated concerns of regulators (including public safety, accessibility and environmental protection), then they should be permitted to operate without further restriction, despite what some Luddites may argue.

  4. Mariajo says:

    The issue I found quite fascinating when reading the Eskenazi’s article on the French case, the Law Commission’s report and the news coverage of the Uber case in Germany, is the completely different approach these different jurisdictions take towards a very similar issue. In all different accounts, the underlying issue is that new technologies are strongly pushing for a deregulation of the traditionally regulated taxi market. In France (the ‘progressive’), the highest administrative court seems to have sympathy for a newly emerging market, and for the start-ups that are investing in it, and therefore seems to be rather in favour of deregulation. In Germany (the ‘conservative’) on the other hand, all courts are struggling to get their grips on Uber’s expansion to protect the traditional taxi industry. Albeit the district court of Frankfurt issued a country-wide ban of Uber for two weeks, and then changed its mind, the district court in Berlin last week decided of an absolute Uber-ban in Berlin (http://www.berlin.de/sen/justiz/gerichte/vg/presse/archiv/20140926.1255.399438.html). It did so inter alia for the protection of the taxi industry, “an industry in which the general public has an interest”. Then of course, it is harder to have sympathy for a giant like Uber in comparison to the small enterprises in France. The English (the ‘wait-and-see’), when it comes to the quantitative restrictions of taxi licenses, appear to have an interesting ‘as-long-as’-stance; as long as public interest objectives are served by the quantitative restrictions, which include the interest of consumers, the sustainability of the industry and the protection of the environment, they are justified. Nonetheless, quantitative restrictions should be reviewed every 3 years. The English therefore seem to see potential for new technologies to lead to a deregulation of the taxi market, but seem to think that the time is not yet ripe for it.

    On the legalistic question I had the thought that a law having anticompetitive effects can be challenged much the same way as a law harming human rights. From Eskenazi, I got the idea that this is exactly the type of analysis that the Conseil d’Etat engaged in. It tested whether the law imposing the 15 minute waiting period in the interest of public order took account of the freedom of trade and industry (which quite similar to the fundamental right to have a profession and engage in business) and competition rules. The Conseil d’Etat engaged then in a form of proportionality test, where it found that the 15 minute waiting period was not appropriate to really improve traffic flow or to help the taxi profession. It therefore placed freedom of trade and competition above the public order considerations based by the French government. I do not see much difference here to the balancing exercise we can find in fundamental rights cases.

    • Elias says:

      Below you find just a few comments on the first question concerning the reasons of regulation:

      The regulation of the taxi market could first of all be justified by economic reasons. The taxi sector has features which are very similar to (other) network industries. For instance a potential market entrant in the taxi sector faces high fix costs (e.g. costs for the purchase and the maintenance of the vehicles, costs for meeting the different regulatory standards, costs for qualification, costs for licences), whereas the variable costs are in comparison rather low (fuel, wages of taxi drivers). Therefore, the grant of exclusive or special rights and the consequent restriction of the number of market sectors enable the taxi enterprises to recoup their investments and high fixed costs.

      Moreover, the restriction of the number of taxi operators via the grant of special or exclusive rights aims at tackling the negative externalities caused by excess supply. Given that excess supply of taxi services leads to higher traffic and rank congestion, increased noise and air pollution, the establishment of a numerus clausus through a licence system supposedly avoids these problems and reflects public interest considerations in terms of traffic management and environmental policy.

      Furthermore, the regulation of the taxi sector via the grant of exclusive and specific rights is also often justified by the public interest goal of consumer protection. From this perspective too fierce competition in the taxi sector would allegedly entail a ‘race to the bottom’ in terms of quality of the services and vehicles, of working conditions as well as of safety standards. In the same way, the price regulation through the establishment of fixed cab fares is supposed to protect consumers from fraudulent conduct and information asymmetries and at the same time ensure a stable financial income for the taxi operators. In addition, the opening-up of the taxi market could entail a decrease of accessibility and social inclusion, because of the phenomenon of ‘cherry picking’. Accordingly, taxi operators would provide their services primarily in lucrative areas and to wealthy / easily transportable clients, to the detriment of less attractive regions and of disabled or less wealthy persons.

      From a political science perspective, you could of course also partially explain the regulation of the taxi sector by public choice theory and by the phenomenon of ‘regulatory capture’. In particular Eskenazi’s article underlines the political influence of the traditional taxi lobby, which successfully defends its privileges. The fact that the French government adopted a very restrictive regulation of the VTCs despite the opposed opinion of the French Competition Authority also illustrates the political influence of the taxi lobby.

  5. Jotte says:

    The interesting dynamic that the Uber app brings to countries is that their regulatory and legislative responses reveal to some extent their producerist or consumerist orientations. With producerist I refer to an orientation of the state on the supply side of a market. Producers are accorded a central function in society that goes further than merely an economic function but is able to provide a certain social identity to people. The protection of guildes (lawyers, waiters in France, pharmacists), certain ways of making products (pasta, wine, reinheitsgebot) or even the size of stores and their opening times thereby fulfil a social function that resonates with a certain culture, history and identity. Obviously such functions are subject to social change. A (economic) consumerist orientation is, by contrast, focussed on rights and interests on the demand side of the market-in particular, primarily as an interest in competitive prices and choice. Europe is traditionally perceived as oriented more towards the supply side (in particular Germany and France) whereas the US harbours the fundamental consumerist interest. Perceived in this way the Uber app, which gained ground and regulatory recognition in the US, can be framed as an attack on European producerist orientations. The dynamic between producerits and consumerist types of legal systems is an interesting one, especially within the EU where there is the potential of a clash between systems that made different regulatory choices. In situations where, e.g., service providers from a consumerist oriented MS are restricted in their trade due to a producerist regulatory framework and the producerist oriented legal system cannot provide good arguments for its existence (such as an important societal function of national identity) it is liable to be qualified as a restriction of free movement that cannot be justified and it can be overridden by the consumerist interest coming from another MS. Although this is of course a slightly different situation, the inherent regulatory dynamic that Uber brings to the countries where it is launched seems to be essentially the same. That is to say that the existing regulatory protections of the taxi industry are being critically assessed with respect to the function that they actually provide and the suitability of the regulatory framework and restrictions on competition. Unlike as is the case in Britain, in the Netherlands an argument can be advanced that the social function of taxis is negligible if not negative (in some places you have to be careful not to be bullied away by groups of taxi drivers if you question their practices, if not even getting beat to death as happened in 2009 to someone who complained about the fare). The taxi industry in Amsterdam has been dominated by one operator that has used is dominance to bully away any attempts to open the market or increase the quality of service. None of the regulatory changes in the framework have really worked out due to, arguably, the dominant economic presence of the vested player. In this situation it therefore seems that the producerist focus on the industry has been mainly to do with interest capture and attempts to remedy a bad situation. No social function is being served. In such situation of bad regulation it can be argued that the consumerist break through strategy of allowing Uber to rationalise the industry is not such a bad idea. In this way a concentration of economic power and interest capture of a regulatory framework can be circumvented. However, initial regulatory responses in the Netherlands do not point in that direction.

    See James Whitman, ‘Consumerism Versus Producerism: A Study in Comparative Law’, Yale Law Journal 340 (2007)

  6. mhaag says:

    A website called “mitfahrgelegenheit.de” has been operating in Germany for a few years now. On it, private drivers can look for private passengers willing to pay them for long distance car rides. The company has a fee of 11% of the fare whenever it has successfully matches a driver and a passenger. About 1.3 million people make use of this service every month. So far in Germany there have been no complaints about this company. Interesting then, that the German reaction towards Uber, a company that offers a very similar service, has been so harsh. Even though the Frankfurt regional court lifted the countrywide ban on its services in Germany, it maintained that the legal arguments against Uber were valid, and thus the legal battle between Uber and the German Taxi Association is not over. Why then this attack on Uber that is providing seemingly similar services to the services provided by other legal companies in Germany? Similar concerns about passenger safety could be raised for these other carpooling companies. One German newspaper (“Süddeutsche Zeitung”)* suggests that this is due to a deep scepticism of the US start-up scene. This should not be, however, reason to prevent a competitive market from developing.

    http://www.sueddeutsche.de/wirtschaft/ablehnung-des-mitfahrdienstes-uber-lobbyisten-der-vergangenheit-1.2133426

  7. Leticia says:

    To me the most interesting aspect of readings is the nuance between “reasons” and “technical justifications” for regulating the taxi industry. The main technical justifications seem to be the resolution of information asymmetries (users of taxi services do not have the chance to shop around before taking a cab and hence to promote the most cost-efficient service, so it is optimal to harmonise prices and safety levels) and assuring availability of service (if quantity controls were not imposed, there would be lack of taxis at certain areas and/or times, as most of them would have stronger incentives to stay in bigger areas at peak times). Reasons for regulation, on the other hand, seem to lie on the pressure that the taxi industry has been able to put on the policy maker so as to get a regulatory framework that benefits them. Both price and quantity control guarantee the taxi driver (and the business organisations in which they are placed) a minimum and relatively stable subsistence. Safety standards are also beneficial in the long run, as they promote trusting consumers. The Law Commission report shows that, when asked whether they would prefer a more de-regulated system, most taxi drivers and unions say no.

    I don’t think it’s surprising that French policy-makers react in such a way to the emergence of Uber and the consequent complaints of the taxi business. The taxi industry has got strong incentives to mobilise, as their stakes are specific, they are relatively reduced in number (which makes mobilisation easier) and they are frequently backed up by the big sums for lobbying that some big taxi companies are able to provide. It’s Olson’s logic of collective action. In the countries with a two-tier system like the UK, the logic of competition would advise to leave things as they are and allow Uber to operate within his market sector. In the countries with a single regulation for all types of transport performed by a driver in a car, the logic of competition would advise to differentiate between taxis and uber-like services. And yet, the restrictions that the French government imposed to Uber just seem to be concerned about the living standards of the taxi industry. This reality can be appreciated in the Law Commission report on the discussion about quantity restrictions, with expressions such as ‘the general public have very little representation’ and ‘would-be entrants into the taxi and private hire markets are another group significantly affected by quantity restrictions who, like consumers, do not have a strong voice’ (although the Law Commission seem to ponder all these interests in a more balanced manner).

    One could argue that perhaps the regulation we’ve got now might be related but not owing to the way it benefits the taxi industry. I’ve got my doubts, but even in that case I see that when the status quo benefits a particular, well-organised sector, it is very likely that things simply stay that way as the costs to do otherwise will be too high for the public authorities. See the discussion on plate values in the Law Commision’s report: the Law Commission acknowledges that ideally they should not exist, but that removing them would disappoint those who signed a mortgage to buy a license (didn’t they assume that risk when they enter the business?) or those who trusted counting on something to retire with (shouldn’t that be a duty for the welfare state, instead of an investment to make for the individual in question?), hence plate values remain legal.

  8. Fabrizio says:

    Public Interest Test, taxies and perfect competition

    In this reaction paragraph I want to comment the Report of the UK Law Commission, focusing mainly on the relation between the Public Interest Test for determining quantity restriction and perfect competition model. I argue that economic analysis and law & economics do not bite much in the Report. The first is explicitly disregarded. Instead the second has difficulty in offering a justification for the content of the Public Interest Test. This justification is offered by elaborating a particular conception of perfect competition.
    The test is the result of a procedure that seems consistent with the “Five Criteria for Good Regulation” proposed by Baldin, Cave and Lodge. Worthy of notice, cost-benefit analysis does not play any significant role in the Report. I also found of particular interest the final suggestion of “bas(ing) decisions on actual data instead of projected figures and other proxies” (11.79). This statement confirms a general distrust of economic literature.
    The test is composed of (at least) four factors. The first is a general consumer interest test. The second and the third highlight particular interests to be accommodated: on one hand, disabled passengers; on the other, congestion and environmental issues. The last factor is the sustainability of the industry. Albeit these criteria are not defined, the whole Chapter 11 of the Report helps in clarifying them. In particular, consumer interest is about fares and quality of service (waiting time as well as vehicles quality and safety – see 11.44, 11.48-11.60) while sustainability regards mainly income, number of working hours and the risk of individual exploitation of drivers (see 11.17-11.20 and 11.23-11.27).
    Notably, the test is arguably consistent with a conception of perfect competition as a tool for fostering consumer welfare within a healthy market. In fact, both sides of the market are put in the condition of being better off through transactions. However, emphasis is also put on the distribution of value among parties, which has to favor the consumer. This is a requirement that probably would not be endorsed by a traditional law & economics approach. In my understanding, a law & economics analysis would advocate a mere Pareto superiority test (which would be satisfied assuming the absence of externalities). Further specifications would be labeled as redistribution and would trigger arguments for expelling them from the market. Law & economics could probably cope with the environmental and congestion concerns qualifying them as externalities, under the assumption that transaction costs are too high for a private negotiation. More complex to accommodate is the cross-subsidization between healthy and disabled consumers. These last two concerns can be accommodated in a perfect competition framework if the model is conceived of as a toll for establishing the content of the relation between the producer/seller and the buyer. If this is the case, externalities have to be internalized because they are costs of production that the system has to transfer to the consumer. Besides, the model is silent regarding the relation between different classes of consumer: other types of argumentation schemes have to be considered for justifying (or criticizing) such policy.

  9. Theodosia says:

    The reading material provides a useful insight on how regulation might disregard consumer interests. My conclusion following review of the material is that we should be very careful (and why not critical) when we assess the costs and benefits of a proposed regulation. I take this view considering that the introduction of a regulation might often be the result of successful lobbying and political pressure and not a necessary instrument for the protection of public policy objectives. I would like to elaborate on my thoughts by highlighting the following issues:
    -While I was reading the main arguments in favour of the quantity restrictions I was thinking that in a number of cases the Law Commission took the view that the economic interests of the taxi drivers are more important than those of other economic groups. For example in page 148 of the report the Law Commission states that the taxi drivers who are unable to acquire their own vehicle licenses due to the quantitative restrictions feel exploited and face severe economic difficulties. On the other hand the Commission underlines that potential removal of quantity restrictions might cause serious financial problems to the taxi drivers present in the market taking into account that increased taxi numbers means increased competition for work. Although I do understand that the removal of quantity restrictions might undermine the financial stability of the taxi drivers who already acquire a license I do not understand why the Commission takes the view that the financial stability and security of this economic group is more important than the stability of the professionals who cannot enter the market because of the quantity restrictions. In particular my question here is the following: under which criteria does the Commission promote the protection of a specific social and economic group? And if indeed there is a good argument for the protection of this group two more questions should be answered: is the maintenance of the restrictions the appropriate and necessary instrument for the achievement of this goal? are there alternative policy options under which the interests of the consumers and the potential competitors may be disregarded less?
    – A second argument in favour of the quantity restrictions (pg 149) is that the removal of the quantity restrictions might increase the waiting time of the taxi drivers and as a result might decrease the productive efficiency of the industry. While I understand the economic rationale of this argument I do not understand why the increase of the waiting time of the drivers is more important or valuable than the waiting time of the consumers who also work and have responsibilities. Again I have the impression that the Commission made a socio- economic choice without taking into account the interests of different groups, such as the consumers.
    -In page 149 of the report the Commission presents the argument that in a derestricted market drivers would not make enough money to maintain their vehicles properly, and the incentive to invest in new vehicles would be reduced. My question here is the following: why does the Commission assume that the incentives of the drivers to invest in new vehicles will be reduced? Isn’t it possible that if new drivers enter the market the taxi drivers present in the market might have more incentives to invest in the quality of their services?

    To conclude I am not convinced that the maintenance of the restrictions is based on a thorough examination of the interests of all the economic groups involved. I would be more convinced about the necessity of such restrictions if they were the result of a balancing act between the economic interests of different economic groups (taxi drivers – potential competitors, consumers) and the public policy objectives pursued by such restrictions.

  10. Noguier Alice says:

    The taxi market is characterized by consumers imperfect information. This market feature justifies regulation on prices and regulation of the profession (exams and driving license requirement, obligation to maintain vehicles…). Regulations enable consumers to have information on prices and quality, so that the market is more competitive.
    On the basis of the “information” feature, it appears that there are actually two markets in the taxi activity: the “hail and ride” market and the market for prior booking. Indeed, when a taxi is hailed in the street, the consumer is informed on the price and the quality because they are regulated. Without regulation, no information would be available before asking the driver. If there is no other taxi around, the taxi driver is price maker and can charge a high price. The market is then far from the perfect competition ideal.
    In the case of prior booking, customers can call different taxis to obtain information. The competitive process could work here without regulation setting prices since information can be made available for consumers.
    However, new technologies may blur the line between those two different markets. Why an application that allow a customer to locate taxis around him/her and to book one of them immediately, could not be considered as “hailing on line”? Then, the regulation on the “hail and drive” market may not be justified anymore since consumers could have information regarding the offer trough the application.
    To sum up, regulations on prices, cars maintenance and drivers skills are implemented to solve market failures. Nevertheless, the extent in which they are really needed is arguable. It seems that other ways to provide information on prices could be find. However, regulation on safety is needed.

    On the other hand “numerus clausus” regulations are implemented essentially to protect taxi drivers.
    A bargaining between more taxis so more competition and taxi drivers’ work conditions as well as safety, congestion, and air quality, is made.
    It is argued that derestriction may bring more competition, but nothing is less sure. At first the number of taxi could increase, but the price would not necessarily decrease. Indeed, big taxi companies could attempt to monopolize the market by offering cheap prices, which independent taxis or small taxi companies would no be able to compete with. Once the competition of smaller companies eliminated, one or few big taxi firms would have important market shares and could increase prices.
    Moreover, as stressed in the Law Commission report, derestriction could have an impact on the quality of the service. Due to increased competition, taxi drivers may charge less for a ride. As a result they may need to work longer hours and invest less in the maintenance of their vehicles at the expense of safety.

    In the end, regulation in the taxi market was in part designed to enhance competition, but has also created barriers at entry of the market. However, it is not certain that deregulation could lead to more competition.

  11. stavros says:

    Competition analysis in the Conseil d’Etat’s legal assessment

    The type of analysis followed by the Conseil d’Etat in its assessment of the 15-minute rule involved a proportionality test. Even though this case may have required a competition analysis, the Court avoided using any of the analytical concepts provided by competition law discourse and engaged in the said balancing exercise. Nonetheless, certain competition law reasoning may have enhanced Court’s reasoning. In particular, the 15-minute rule could be deemed as a state-imposed competitive distortion, for it distorts competition without producing any efficiencies (on the contrary, it lowers the quality of the services provided by the VTCs), and it unfairly discriminates between VTCs and taxis in the market for prior booking, since there is no reasonable justification for the differential treatment. Simultaneously, it creates an advantage for the strong player of the relevant market, namely, the large taxi groups which derive a large portion of their turnover from pre-booking. In addition, the Court disregards that the emerging market of VTCs may provide services of higher quality under lower prices and, thus, is likely to maximize consumer (or total) welfare. This argument is enhanced by the fact that innovation (defined as a market-driven concept, namely as any novel product, service or method of distribution that increases sales) plays an important role in the relevant market. In the light of the above, it seems that in this case the proportionality test and a potential competition analysis may have led to the same ruling. However, the methodological tools of the Court and the justification of the decision would have been enriched, should a competition analysis has not been ignored.

    Reasonable reasons for regulation and quantity restrictions

    The English Law Commission adopts a pragmatic approach towards quantity restrictions. Although, it pursued an open deliberating procedure and took into account numerous societal values and interests in order to develop its opinion (a fairness procedural requirement, which should be appraised), its final recommendation in relation to quantity restrictions remains hesitant. Specifically, the Commission does recognize that the legal protection of the taxi market has created a legal monopoly with high barriers to entry, since the would-be entrants have to bear an extra cost to enter the market in comparison to the cost borne by the players of the market at the time of entrance. Provided that the numerous clausus of the licenses permits the license-holders to persistently raise the prices above a competitive level (or not lower them to the marginal cost) without attracting new entrants, it could be assumed that their exercise of market power is likely to harm the consumers.

    In this context, the proposed national standards for licensing, which promote a multitude of objectives (i.e. public safety, accessibility, environmental protection, integrity in law) should have been considered sufficient to facilitate the asymmetry of information problem of the market (i.e. every passenger could safely presume that the license-holder fulfills the relevant qualitative criteria), as well as the other relevant issues (e.g. congestion, over-ranking, unmet demand). Furthermore, the Commission should have indicated how regulation could supplement incidents of market failure (e.g. organize the transportation to and from remote areas; eliminate the unfavorable treatment of certain groups of people because of their individual characteristics, such as the elderly or the disabled) and it should have suggested certain measures for gradually creating the conditions for an undistorted market. Reluctant to move towards such a direction, it chose to preserve quantity restrictions. In particular, the Commission fairly recognized and respected the license-holders’ investments, since the legal regime incentivized them to do so. However, it should have proposed certain transitional stages for freeing-up the market. The purpose of this transitional phase would be to enable the compensation of license-holders for their investments. Thus, Commission’s proposal remains hesitant, as long as it endlessly protects the plate values by permitting quantity restrictions in the relevant local markets.

    To conclude, competition should be promoted to the extent market choices have not been preempted by a reasonable regulatory enterprise justified by an underlying societal value. However, maintaining quantity restrictions or high plate values should not be deemed as a fair reason for regulation. On the contrary, the licensing requirements set by national qualitative standards constitute such a reason.

  12. Elias says:

    Just one comment on the more legalistic question on whether it is possible to challenge laws that have anti-competitive effect:

    From an EU law perspective, there are two branches of ECJ case law in the field of competition law and regulated sectors which show that it is possible to directly or indirectly challenge anti-competitive legislation of a Member State.

    1. Case law on exclusive and special rights

    EU primary law provides in Art. 106 (1) TFEU that Member State have in general the right to regulate markets by granting exclusive or special rights to private undertakings. This provision, however, specifies that Member States may not enact nor maintain any measure which is contrary to EU competition rules and in particular to Art. 101 and 102 TFEU. In numerous cases (similar to the UBER issue) competitors of private undertakings to which a Member State had granted an exclusive / special right invoked Art. 106 (1) TFEU and they argued that the grant of the special right lead to an abuse of the dominant position by these undertakings to which the right had been granted and that the measure therefore constituted a breach of EU competition law. Thus, in cases such as C-30/87 Bodson (‘tombstones’), C-41/90 Höfner and Elser, C-320/91 Corbeau, C-475/99 Ambulanz Glöckner or most recently in C-553/12 P – Commission v DEI economic regulation through the grant of exclusive or special rights has been challenged on the basis of Art. 106 (1) in combination with Art. 102 TFEU. Moreover, there are also many cases in which numeri clausi or the grant of special and economic rights have been indirectly challenged on the basis of Internal Market law, in particular the freedom of services (Art. 56 TFEU) or the freedom of establishment (Art. 49 TFEU) (for instance gambling, sports betting and pharmacy cases).

    2. The possibility to challenge anti-competitive legislation outside the scope of Art. 106 (1) TFEU

    Moreover, it is also possible to challenge anti-competitive Member State regulation which does not constitute a special/exclusive right and therefore does not fall within the scope of Art. 106 (1) TFEU. The ECJ hold already in its early case law that pursuant to the principle of loyal cooperation (today Art. 4 (3) TEU) the Member States may not enact any legislation or legal acts which are contrary to EU competition law or enable undertakings to escape from the constraints imposed by EU competition law and in particular by Art. 101 and 102 TFEU (Case 13/77 Inno v ATAB, para. 33). The ECJ specified this doctrine (called “doctrine Inno ATAB”) in C-267/86 Van Eycke and hold that, even if Art. 101 and 102 TFEU are only directed towards private undertakings, the reading of Art. 101 and 102 TFEU in combination with Art. 4 (3) TEU “require[s] the Member States not to introduce or maintain in force measures, even of a legislative nature, which may render ineffective the competition rules applicable to undertakings . Such would be the case, the Court has held, if a Member State were to require or favour the adoption of agreements, decisions or concerted practices contrary to Article 85 or to reinforce their effects, or to deprive its own legislation of its official character by delegating to private traders responsibility for taking decisions affecting the economic sphere” (van Eycke para. 16). This so-called “van Eycke doctrine makes it possible to challenge anti-competitive legislation by relying on Art. 101 or 102 TFEU in combination with Art. 4 (3) TEU. This was for instance the case in C-185/91 Reiff, C-359/95P Ladbroke, C-35/99 Arduino (Italian lawyers). In C-198/01 CIF (Italian matches) the Court further developed this doctrine and held that it is even the obligation of national courts and authorities to disapply national legislation which contravenes EU competition law rules (para. 48-49).

    Thus, we can conclude that it is possible to challenge anti-competitive laws / regulations by relying on EU law.

  13. Maria says:

    If regulation is in place in order to guarantee the quality of the services in terms of safety, hygiene, environment protection, etc. –apart from clearly protecting a privileged position of taxicabs in the market-, I would feel inclined to think that the question these new applications pose is not so much the need to protect technological innovation in markets –let’s just think about how many taxi companies have developed mobile apps that allow consumers to get a taxi in a few minutes as you would do on Uber, maybe, precisely, as a reaction against the threat of these new companies-, as much as they question the way traditional regulation protects these interests through license systems, for example. If consumers can overcome the imperfect information characteristic in this market through an app that allows them to get information on the price and how much of a good driver, even though maybe too talkative, a driver is going to be, can regulation warn them against their own choice? Can the model offered by Uber, allowing supply and demand to meet “spontanously” online, replace the traditional licensing system?

  14. Marcos says:

    In my opinion, the third question is a little bit tricky. I would say that competition should rank as high as it is capable of providing the benefits it is supposed to (it seems to me that competition is not an end in itself, but its justification always refer to some other good: economic efficiency, consumer welfare, technological innovation, etc.). This capacity of producing these benefits depends mainly on the conditions of the specific market one is dealing with: in the case of taxi services, the impossibility of real choice between service providers (taxi drivers in the hail and ride market) makes it very hard to argue that a higher number of taxis would necessarily signify lower prices, for instance.
    In addition, competition must also be balanced with other non-economic goals (labor protection, environmental concerns and other relevant public policies), which could rank above or on the same level as the achievement of perfect competition. In this case, it seems more or less clear that the Law Commission weighted particular interests of competitors more carefully than those from other groups. For this reason, the result of the whole reasoning sounds flawed.

  15. Small update on the Uber situation in Germany: The president of the German Federal Cartel Office has publicly stated that he think Uber & Co can be beneficial / good for the Taxi market in Germany. http://www.heise.de/newsticker/meldung/Kartellamt-Chef-sieht-positive-Wirkung-von-Uber-auf-die-Taxibranche-2411587.html (link in German)

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