Rules of the road

taxis take to the streets
Taxis take to the streets

Visitors to Paris may have noticed that it can be hard to find a taxi. Lately, there have been days when it was impossible. The explanation? A strike.

Before you roll your eyes, it’s worth taking a moment to hear what’s riling the taxi-drivers. Yes, in many ways this feels like the sort of dispute we’re used to around here – shouting, blocked streets, frustrated travellers. But it also reflects issues that are playing out in many other parts of the world and that can be summed up in a word: regulation.

The roots of the dispute date back to 2009, when France licensed a new sort of taxi, a “passenger vehicle with chauffeur,” or VTC. These VTCs operate under rules similar to those covering “mini-cabs” in the United Kingdom: You can call one to pick you up at home, but – unlike a regular taxi – you can’t hail one in the street.

Even though VTCs are not full competitors, the taxi drivers don’t like them. They point to the fact that taxi drivers have to pass a test; VTC drivers don’t. But a bigger gripe is money. VTC drivers pay €120 for a licence. By contrast, a taxi licence is free – in theory. In practice, it’s anything but. In Paris, the price currently seems to about €240,000 (around $320,000). The reason it’s so high is that, as Le Parisien (in French) explains, only a very limited number of taxi licences are issued. If you want to secure a free licence you may have to wait 17 years. So, instead, would-be drivers buy licences from drivers who are retiring.

Still, despite their resentment, it’s possible that the taxi drivers might have learned to live with the VTCs – after all, old-style taxis in London seem to do fine despite being vastly outnumbered by mini-cabs. However, the emergence of new technologies has probably put paid to that hope. Using an app on your smartphone, you can order a VTC, provide your location and pay the fee with just a few swipes on your screen. That’s increasingly blurring the distinction between regular taxis and VTCs, and seems to have been the final straw for the taxi drivers. Hence the strike, and an announcement by the government last week that it would work to draft “new rules for balanced competition”.

That could prove challenging. The taxi drivers are angry: “Today, we are facing direct competition from VTCs that work virtually without regulation,” Karim Lalouani, a member of a taxi union, told RFI. “We are not fighting on equal terms.” But for their part, the VTC operators say they’re filling a gap. Certainly, by international standards France is short of taxis. The national total of 55,000 taxis and 12,400 VTCs is below the combined total of 72,000 for London alone. “People in France are fed up with monopolies,” Pierre-Dimitri Gore-Coty of US-based Uber, which operates VTC services in France, told The Economist. “The French now realise that in real life more competition brings innovation and improves the level of service.”

But even when new regulations appear, technology could make them outdated very quickly. After turning VTCs into quasi-taxis, app technologies are now turning anyone with a car, clean licence and a smartphone into a potential taxi driver, according to Stephen Shankland.

If it’s any comfort to the French regulators, they’re not the only ones facing challenges. In the United states, says The New York Times, “regulators, courts and city halls are struggling to define Uber. Is it a taxi company or a technology platform?” And it’s not just taxis. Services like Airbnb and FlipKey now mean that anyone with keys to an apartment can become a hotelier. Some cities aren’t happy. New York has subpoenaed Airbnb. By contrast, Amsterdam, has changed the rules to make Airbnb-style rentals easier.

So, what to make of this particular regulatory debate? Are existing service providers, like hoteliers and taxi drivers, being forced to play on an uneven playing field? Or are they a vested interest defending market rules that don’t serve consumer needs? Or are consumers facing increasing risks from “rogue” operators?

While pondering these questions, you might like to take a broader look at how OECD countries – including France – stand on a wide range of regulatory issues that affect competitiveness in our economies. This new data tool (below) has just been released alongside the latest edition of Going for Growth, the ongoing OECD project that examines the impact of structural policies, including regulation, on growth. The tool compares regulation and competition rules between countries across a wide range of markets, including telecoms, power and legal and other professional services. Ideal for passing the time while you’re waiting for that taxi.

Useful links

Going for Growth

OECD Indicators of Product Market Regulation

Brian Keeley

2 comments to “Rules of the road”

You can leave a reply or Trackback this post.
  1. Nick Bridge - 22/02/2014 Reply


    Thanks for your piece, and congratulations to all those involved in producing the data tool for Product Market Regulation. Delighted to see the UK comes out well compared to other countries, but note that we have some areas where we need to do better.

    Best regards,

    Nick Bridge
    British Ambassador to the OECD & IEA

Leave a Reply