The FCCA intervenes with practices of companies in the taxi industry that have adverse effects on consumers, restrict competition and prevent the market from opening up. These practices include
It is the responsibility of each company to assess whether their own operations meet the provision put forward in the Competition Act. The FCCA does not have the authority to approve practices between companies in advance. Instead, the FCCA intervenes with competition restrictions based on a retrospective assessment.
However, the purpose of the Competition Act is not to prevent new and innovative services that benefit consumers, from entering the market. The FCCA provides businesses with advice on what aspects should be taken into account when providing services.
Cooperation between competitors
Drivers that are independent entrepreneurs are undertakings which compete against each other regardless of whether or not they are part of the same dispatch centre. Competition restricting cooperation carried out within a single dispatch centre is less harmful to the functionality of the market if there are several dispatch centres operating on the market and the competition between them works well. The FCCA takes this aspect into account especially when deciding which cases should be investigated thoroughly. A taxi company that employs its own drivers forms a single company and regulations on cooperation between competitors do not affect its internal operations.
The Competition Act prohibits such practices between competing companies that are intended to restrict competition or as a result of which competition becomes restricted. For example, competitors may not agree on prices or participate in other forms of price fixing, divide markets or agree on collusive tendering practices. Practices that are prohibited include for example agreeing on prices, market-sharing and collusive tendering.
Cooperation that restricts competition may be allowed if it generates more benefits than harm to consumers. In such cases, the cooperation must be vital for achieving the benefits.
The FCCA always assesses the effects cooperation has on competition retrospectively on a case-by-case basis in accordance with the framework presented below:
Examples of forbidden cooperation and its assessment
Cooperation between dispatch service providers that restricts competition is generally always forbidden. In exceptional cases, it may be allowed if the companies can prove that the cooperation is beneficial and necessary for consumers.
Joint tenders. Competitors are not allowed to submit a joint tender if they could have submitted separate tenders without cooperation. If the companies could have submitted independent tenders, cooperation may only be allowed if the companies can prove that consumers benefit from the cooperation and cooperation is essential to achieve this benefit.
Price fixing between competitors. Determining a fixed price or a minimum price between competitors is generally always forbidden.
Setting a maximum price is also considered price fixing and is generally forbidden between competitors. Setting a maximum price may be allowed in exceptional cases, if the companies can prove that
- the maximum price benefits consumers and the cooperation is necessary to achieve this benefit; this can be the case in some situations in which consumers book taxis over the telephone or using an application, for example
- it is genuinely possible for each company to offer services at a price that is lower than the maximum price
- the maximum price does not cause the prices of competing companies to become fixed in practice in a way that is disadvantageous to consumers
In the assessment, it must be taken into account that consumers may have a justified expectation that a maximum price applies to all rides offered under the same trademark. In principle, the potential consumer benefit gained from maximum pricing requires that the maximum price applies to all rides offered under the same trademark.
In the event that competitors using the same dispatch centre set maximum prices, it must be ensured that they are not at the same time imposing restrictions on companies using the dispatch service which are not necessary for gaining consumer benefit or which may result in a fixed price between competitors. Companies using the dispatch service must have a genuine opportunity to compete with the dispatch centre and other companies by means of undercutting the set maximum price and by offering rides under competing trademark. The outcome of this is that trademarks using the same dispatch centre may set their own maximum prices, provided that the efficiency defense of maximum pricing is fulfilled for each price fixing cooperation. Furthermore, the anticompetitive effects of the dispatch centre’s maximum pricing are, as a rule, lesser when the centre accepts all drivers under its dispatch services.
Drivers agree on driving shifts. Competing drivers agreeing on driving shifts as a rule constitutes prohibited cartel activity. Agreeing on driving shifts may only be allowed very exceptionally, for example during quiet hours, if the companies can prove that it benefits consumers and is necessary. This can be the case, for example, if there would not be enough cars available without this cooperation and each car has the right to take rides even if they are not scheduled to be on a shift.
Where competing drivers using the same dispatch centre agree on driving shifts, it must also be noted that as a rule, drivers using the dispatch service who are not on shift or not party to the driving shift schedule must have an equal right to dispatched rides as drivers on shift. Furthermore, the anticompetitive effects of driving shifts are, as a rule, lesser when the centre accepts all drivers under its dispatch services and drivers are not restricted from accepting rides from other dispatch centres or driving under a competing trademark. In the event that a dispatch centre is in a dominant market position, its special responsibility to ensure that it does not hinder competition, as described below, applies also in this case.
Abuse of a dominant position
A dispatch centre or other taxi service company may be in a dominant market position if its position on the market is so strong that it can operate independent of competitors. Market dominance itself is not forbidden but abusing it is. The following aspects are taken into account when assessing market dominance
- How big is the dispatch centre’s or taxi service company’s market share and how has it developed? A particularly large market share (over 50%) creates a refutable presumption of a dominant market position, but a company with a smaller market share may also be in a dominant position.
- Are there other dispatch or taxi service companies operating in the area and how big is their market share?
- Is the dispatch centre or taxi service company the only one in the area to cover taxi services reimbursed by Kela?
- What other factors reassert the dispatch centre’s or taxi service company’s position in the market?
Dominant dispatch centres have a to ensure that they do not hinder competition
- Dominant dispatch centres have an obligation to include all drivers under their dispatch services, unless they can prove that there is an objectively justified reason to refuse some drivers.
- Dominant dispatch centres should distribute Kela reimbursed taxi transport to all drivers using objective criteria.
- Dominant dispatch centres may not directly or indirectly limit the possibilities of companies operating within its scope to take transport requests from other dispatch centres.
How will the FCCA intervene with detected problems?
The FCCA investigates the taxi service market both on its own initiative and on the basis of requests for action. Measures taken by the FCCA are determined based on the severity and harmfulness of the company’s practices.
- Shortcomings are corrected using commitments suggested by operators.
- The FCCA may require a practice to be stopped completely. If a forbidden practice is continued the FCCA will take the case to Market Court.
- In cases involving serious violations of the Competition Act, the FCCA will present the Market Court with a penalty payment proposal.
Contacts regarding competition policy enforcement on the taxi service market
Assistant Director Valtteri Virtanen, tel. +358 29 505 3621,
email address firstname.lastname@example.org.
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