The Irruption in Transportation that Obligates to Change the Law

Jun 12, 2017Antitrust

Much has been claimed by traditional taxis from the invasion of its market by applications such as Uber and Cabify. From the perspective of free competition, it is the lack of updating of the private transport law that puts taxis at a certain level of disadvantage.

The disadvantage is not absolute in that a user who requests an Uber or Cabify from his office is not a user who is in competition with traditional taxis, unless they are affiliated with an application type Easytaxi or Safertaxi. Likewise, a person waiting for a taxi in the Alameda is not a potential user of an Uber or Cabify, even a micro or metro could become a better substitute. Therefore, it is not at all evident that taxis are in competition with these new technologies.

However, it is clear that those who already have a traditional taxi (or had it before the entry of Uber or Cabify to Chile) have disadvantages. The most expensive would seem to be the price paid for the transfer of the «quota» or right to act as a taxi. The public information available shows that the transfer of the quota costs around 10 million pesos, which obviously must be added the cost of the car, patent, insurance and others.

These 10 million pesos are a sunk cost and a very important exit barrier for taxi drivers. However, this barrier was imposed by law through the closing of the Taxis Registry in 2005. Moreover, it is possible to find several initiatives of parliamentarians that were looking to open the Taxi Registry since 2010. In other words, those 10 millions are the result of an inefficient market emanating from the law itself.

In this context, the entrance of Cabify and Uber in the market has shown such inefficiency precisely because of the success of these companies. Likewise, if there is indeed competition between traditional taxis and Uber and Cabify, it is expected that the rights for traditional taxi quotas lower their prices, but there is no evidence that this has happened (or has not occurred).

The clamor of the taxi drivers should be addressed to the legislators so that they can provide the service in the same conditions as Cabify and Uber, but using the standard of the latter two companies and not traditional taxis. After all, the benefits to the consumer of these new options are evident: to know rates in advance, to know time and place of arrival and use of payment cards. And while the right of competition is not the same as the right of the consumer, at least they are first cousins.

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