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Not a license for anti-competitive drive

Editorial | Mary Ma Mar 15, 2017
The taxi industry has again threatened to take strike action on Friday, in an attempt to force the government to shelve a plan to introduce 600 luxury cabs to the market.

It's strange the trade is so paranoid about competition.

First, they were spooked after Uber launched its ride-hailing service in the SAR a few years ago. Now that the courts have clamped down on the commuter- friendly service, the taxi trade has switched to campaigning against the government's "franchise taxi" plan.

The plan was initially known as the "premium taxi" scheme, but the name was changed to avoid the inference that existing cabs would be less premium, or substandard, if the newcomers were to be called "premium."

The change was unwarranted. While we don't know whether the new premium scheme will be popular enough to justify the use of the term, it does conjure up contrasting images of the deplorable conditions of many vehicles, along with inferior taxi services that customers are forced to endure on a daily basis.

There was absolutely no need for Secretary for Transport and Housing Anthony Cheung Bing-leung to bow to pressure to rename the scheme.

So, will the minister and administration back down yet again after 500 taxis surround the government headquarters complex in Tamar on Friday? I hope not, because consumers' interests should always come before the self- interest of the taxi trade.

Taxi drivers may oppose the premium scheme. However, the owners of the 18,163 taxi licenses are the major force blocking competition. Since 1994, many licenses have been concentrated in the hands of major players.

The figures are broken down as 15,250 urban red taxis, 2,838 rural green cabs, and 75 Lantau blue ones.

The price of a red license was HK$7.25 million in May 2015, after hitting a record HK$7.66 million in 2013. As of yesterday, it was traded at HK$6.64 million. Competition from Uber was blamed for the fall.

A further drop in license prices can be devastating for the owners, who have taken advantage of the low interest rate environment to leverage loans with their licenses. Everything would stay ginger peachy if the license value rises, or at least remains stable.

If it drops, money lenders may call loans once the price falls below an agreed level.

Thus, applications to raise taxi fares in the past were mostly initiated by taxi traders rather than drivers, in order to jack up the rents to provide support for the license prices.

After getting the administration to hammer Uber, the trade now targets the premium scheme that would bring only limited competition to the sector. It's just despicable that the trade is so terrified of competition.

It's probably out of political consideration to keep society stable that the government has decided to take the middle ground with the new scheme, rather than modernizing the laws to legalize a new service mode that has proven immensely popular among users.

If Hong Kong's taxi industry doesn't understand why it has become so unpopular - after having monopolized the market for years - it's because it has never allowed competition from outside the sector.



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