16 September, 2015
Uber, an app-based car-hailing company, has caused quite a stir in Hong Kong recently. On 6 July, more than 100 taxis drove to the government headquarters to protest against Uber and other car-hailing apps. On 11 August, in a sting operation, the Hong Kong police arrested five Uber drivers for allegedly operating a car for hire without a permit and driving without suitable insurance. On the same day, the police raided the office of Uber and arrested three staff members. During the following week, more than 50,000 people signed an online petition in support of Uber.
Background
The reaction of the traditional taxi industry to Uber, and other similar services, is hardly surprising. The taxi drivers see Uber as an unwelcome "disruptive innovation". After all, the industry is heavily protected by the limited number of licences that has not seen a change for 20 some years. Uber in Hong Kong only means less income for taxi drivers and licence devaluation for licence owners.
On the flip side, the reaction of the public to the police operations is hardly surprising, too. It is not difficult to see why so many riders are in favour of Uber. Dissatisfaction with traditional taxis is old news. Poor attitude, unreasonable surcharges, and refusing hire are common stories. To the public, the police intervention is clearly the government’s action to safeguard the interests of the taxi sector.
Competition
The poor standard of quality and service in the taxi sector is perhaps a reflection of the absence of competition in the industry. Indeed, competition is what moves an economy forward. Revolutionising the taxi industry by creating competition would in many ways be a good thing for customers and drivers in the long run. To customers, competition will mean more choice and better services. To drivers, competition will mean more choices, also, and cheaper licences. Drivers will no longer be limited to renting taxis from the handful of syndicates that can actually afford the costly licences.
The new Competition Ordinance will soon come into effect, on 14 December 2015. In anticipation of the new law, any action by the Hong Kong government that is seen as discouraging competition will likely be frowned upon by the general public. In fact, the Competition Commission has already taken steps to investigate a number of sectors such as oil and gas companies, travel agencies and the electricity market. There are no apparent reasons why the taxi industry should be treated any differently.
Hong Kong’s economy is one of the freest and most competitive. Competition is bound to happen. The taxi industry cannot remain static forever. Even if – a big if, that is – Uber withdraws from the market, it is only a matter of time before the next Uber enters the market and causes another stir. Therefore, in the face of competition, taxi drivers in Hong Kong should focus on increasing the sector's competitiveness.
Unsurprisingly, the turmoil is not unique to Hong Kong. Uber has caused controversies in many places and lawsuits have been filed around the world. These disputes seem to suggest that no one really knows what to do with this new technology. Perhaps, Uber needs to win a battle in one jurisdiction and the rest will follow.
