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Article Journal Critic:

A Crumbling Monopoly: The Rise of Uber and the Taxi Industry’s

Business Economics

16/03/2018
In "A Crumbling Monopoly: The Rise of Uber and the Taxi Industry’s Struggle to Survive" Erica
Taschler, a Student Fellow at the Institute for Consumer Antitrust Studies, explores reactions of
the taxi industry and the regulatory reactions to Uber and argues that the taxi industry is in crisis
due to the increasing competition from ride-sharing service provider, especially Uber, to its once
regulated monopoly in ground transportation market. Although, ultimately the paper concludes
that innovative solution will save taxi industry in a deregulated ground transportation market.

The paper draws attention to the fact that since its inception in 2009, Uber, as a ride-sharing
company that utilise consumer information sharing with drivers via mobile app, has in 6 years,
gained substantial growth of market share in the United State and worldwide. Taschler points out
that, currently, with operations in 58 countries and estimated market value of over $41 billion, taxi
drivers across the United States accuses Uber of growing its business in unfair competition due
to Uber’s argument that their operation is not limited by the stringent regulatory framework
subjected to taxi medallion owners and taxi drivers that burdens the taxi industry.

Uber argues that they do not own any vehicle and instead it merely provides information sharing
platform to connect independent drivers and passengers. Taschler implies that this argument had
brought great success to Uber in its battle against taxi industry complaint and lawsuit. This is
based on the fact that, except for cities that are still pending judgement in the unfair competition
lawsuit filed by the taxi industry, most cities permitted Uber to start or continue their operation.
Taschler consequently deduced that the taxi industry had failed, for the most part, in getting Uber
to be removed in the ground transportation market.

Taschler also indicated, that Federal Trade Commission (FTC) considers ride-sharing mobile
apps emergence as a player in the ground transportation market allows more competition and
choice for consumer. In 2013, in its letter to the District of Columbia Taxicab commission, FTC
express its concern on the proposed regulations for ride-sharing services by highlighting that ride-
sharing services benefit the consumer in many ways. Nevertheless, FTC supported the notion of
having driver’s background check and insurance requirement for the drivers.

The paper then proceeds to show that some state legislatures did took aggressive approach
toward ride-sharing market than the federal government. Some are more stringent than others
and Uber reacted differently to it. Based on the example presented by Tashcler, Uber reaction
depends on the stringent level of the legislation and usage of its own database system for
background check. It’s willing to eliminate operations entirely to market not in their favour to
demonstrate its growth over burdening regulation. Despite taxi industry arguing that the two-tiered
new regulatory framework created unfair competitive advantage to ride-sharing provider, it will
stays due to the fact that the system compromise between taxi industry’s unfair competitions
concerns and consumer’s desire to use innovative services.

Taschler then proceeds to shows that Uber’s soaring popularity is because of its potential lower
fares, cleaner cars, and higher-quality transportation experience. However, even though
consumers view Uber as an innovative service, many dislike their dirty approach, especially by
their CEO, Travis Kalanick in gaining market share. Tactics such as utilizing its size to generate
below market fares, poor labour treatment and anticompetitive behaviour towards other ride-
sharing service provider affected their reputation significantly. Moreover, statements made by
their executives and public’s growing concern on customer privacy and safety hurt their faltering
reputation even further.

This customer safety concern was also shared by regulators. Most states does not require Uber
driver to go through background check. Hence, Taschler reiterated customer fear that Uber’s own
safety checks are inadequate through series of examples on attacks suffered by Uber’s
passenger from their driver. Weaknesses in customer privacy and safety policy open the door for
taxi to remain relevant in the ride-sharing economy. They can benefits from customers preferring
well-trained drivers and enhanced safety regulations. Thus, taxi industry need to be innovative in
their approach, instead of just relying on lobbying regulators and lawsuits, to stay relevant.

Tachler suggested that strategies such as adjusting its pricing structure and having their own
apps would enable them to stop Uber from continuing its unchallenged monopoly in the ride-
sharing market. I would like to add, apps such as Grabcar is gaining massive popularity especially
in South East Asia, due to its incorporation of taxi as an option in their apps, unlike Uber. However,
now that Uber had shown their interest in purchasing Grabcar to strengthen their monopoly, taxi
may need to create their own apps and attractive flexible fare.

Tachler ended her paper by concluding that the only way to avoid dismantling of the taxi industry
by monopoly of Uber is to take advantage of their weaknesses in customer privacy and safety
while shifting focus from regulation to solution through innovation. Taschler believes that the
survival of taxi industry relies heavily on this. I agree with Taschler that instead of over depending
on authorities and regulators to take action, taxi industry need to get out of their comfort zone to
become innovative in promoting their services in the smartphone era. They need to adapt quickly
or soon, they will no longer be the option for ground transportation market and Uber will continue
its unchallenged monopoly in the ride-sharing market. As the saying goes, if you cannot beat
them, join them.