Taxi apps like GrabTaxi, Uber and Hailo will soon be regulated by Singapore’s Land Transport Authority (LTA).
Singapore is one of the world’s most expensive places to own a car and taxis are a part of everyday life for many residents. Third party taxi apps have seen a surge in popularity in 2014, driven in large part by increasingly competitive promotions targeted at both passengers and drivers.
Let’s take a look at the new rules and their implications for the apps, the passengers, the drivers and the taxi fleets.
What apps will be affected?
The rules apply to “third party taxi booking applications”. Importantly, they do not apply to the proprietary apps of the seven taxi fleet operators such as ComfortDelgro / CityCab and SMRT, which are subject to separate regulation. Here are the key third party app operators in Singapore today:
GrabTaxi was established in Malaysia as MyTeksi in June 2012 by the runners-up of Harvard Business School’s 2011 startups programme. Grab has been backed by (amongst others) Temasek Holdings, Singapore’s state-owned investment vehicle. Grab is now a significant regional player in South-East Asia and currently operates in Malaysia, Thailand, Singapore, Bangkok and Vietnam.
Uber needs little introduction. It launched in Singapore in 2013 and has been aggressively promoting its services via a range of driver and passenger promotions, including “free taxi days” and a recent tie-up with Spotify to enable in-car streaming. The service in Singapore enables booking with licensed taxi and private hire operators but not unlicensed drivers.
UK-based Hailo (an Olswang client) was set up by a team of London black cabbies in November 2011 and backed by some significant investors, including Sir Richard Branson, to the tune of USD $100 million. It launched in Singapore in October 2014 as part of a tie-up with SMRT, although the app will be available for use across other fleets too.
Easy is marketed as “the biggest taxi app in the world”. It was founded in Brazil in April 2012 and is currently available in 120+ cities. It is primarily backed by Rocket Internet, the German-based startups incubator.
What are the new rules?
The LTA has announced that they will regulate third party taxi apps from the second quarter of 2015 and have provided a high-level summary of the rules that will apply. The rules themselves are still to be published and details are fairly sketchy but this is what we know:
1. Apps must register with the LTA
All third party apps must apply for registration with the LTA. The LTA has confirmed that “successful applicants” will be able to obtain a three year licence. There are a number of open questions here. First, what criteria will apply to the application process – one would, for example, expect the LTA to require the app operator to have a physical presence in Singapore, so as to enable better control over their activities. It remains to be seen whether they will impose a cap on the number of operators who can hold a licence – and, if so, whether this (or any of the other requirements) might effectively close off the market to new entrants. Second, there is the question of what conditions will apply to the licence. It is likely that each operator will be subject to conditions within the terms of the licence itself but the precise scope of these conditions is still to be confirmed. Finally, we don’t know yet whether the LTA will impose licence fees on applicants and, if so whether these will simply be a nominal sum or something more substantial. And the elephant in the room, of course, is that if the app isn’t approved (or loses its licence) then it may have to pull out of the lucrative Singapore market entirely.
2. Apps must dispatch only licensed taxis and drivers with valid taxi licences
Put simply, the LTA won’t allow the app operators to link passengers to “ordinary” drivers. The logic here is that this protects the taxi industry in Singapore and ensures that the taxis in question are subject to the full weight of regulatory control applying to the industry (for example, the LTA’s Taxi Quality of Service Framework). The open question is what level of due diligence the apps must do over drivers who apply to work with them – and what will happen if a particular driver who is registered loses his or her taxi vocational licence or ceases to drive for an approved fleet.
3. Apps must implement fare-related safeguards for commuters
All information on fares, surcharges and fees payable for the journey must be specified up-front, before the commuter accepts the dispatched taxi. Arguably this requirement is already covered by existing consumer and advertising law but the LTA considers it necessary to impose this specific requirement on taxi apps. Bidding on taxis will not be permitted and the booking fees themselves cannot exceed those of the taxi fleet operators themselves.
4. Apps must not require passengers to specify their destination before they can make a booking
Singapore’s taxi drivers can sometimes be picky as to the destinations they are willing to drive to – so the feature that requires passengers to confirm their destination prior to booking has been popular with the drivers, as it allows them to decide whether or not they want to take a job. This will have to change because the apps will have to make the “Destination” field optional. Interestingly, some of the proprietary fleet apps (which won’t be subject to these rules), such as ComfortDelgro’s app, currently require passengers to input their destination, so the third party app operators may rightly expect the LTA to impose a level regulatory framework to ensure consistency.
5. Apps must have customer support services for commuters
The LTA expects the apps to “provide basic customer support services, which include lost and found services and avenues for commuters to raise queries and complaints”. More detail will be needed here – for example, will an email address be sufficient or is the LTA expecting the apps to have a full customer service call centre, and will the LTA try to propose service levels on matters such as level of complaints and responsiveness? In practice, clear lines will need to be drawn between matters for the taxi fleet (Comfort, SMRT, etc.) and matters for the app operator, since the apps themselves will have very limited practical control over the drivers and the taxis. If a taxi doesn’t show up for a job booking, for example, then arguably that is a matter for the fleet to raise with the driver, rather than for the third party app to raise.
What happens next?
The new rules will come into effect in the second quarter of 2015. In the meantime, the requirements above will need to be fleshed out with substantially more detail to ensure that the framework achieves its core objective of delivering an effective taxi system to passengers and drivers without unduly skewing the market or preventing competition and innovation.