The legislature’s Transportation Committee last week approved amendments to certain clauses of the Highway Act (公路法) that would impose fines of up to NT$25 million (US$786,056) for illegal taxi service operators, such as Uber, whose Internet ride-hailing services are not legal in Taiwan.
Uber said that the heavy fines will harm the interests of drivers and consumers alike, and stand in the way of innovation, which would not help President Tsai Ing-wen (蔡英文) promote her Asian Silicon Valley plan.
The cross-border nature of over-the-top (OTT) services — those provided over the Internet without the involvement of conventional operators — makes it very hard to simply ban them. Heavier fines will not stop such businesses.
However, Uber’s image as the epitome of innovation is also an exaggeration. Its model is a kind of disruptive technology that uses its technological advantage to break free from physical limitations and cross legal boundaries.
Uber, which operates under unregulated conditions, is comparing itself with taxis, which are subject to heavy controls. Uber has gained a competitive advantage from the differential structure of laws and regulations, thus making itself attractive to consumers.
For example, the government regulates taxi fares and issues taxi driver licenses, and taxi drivers have to pay for insurance. If these controls were relaxed, it is not certain that Uber would still have such a great advantage. To resolve the market disruption that Uber is causing, steps will have to be taken to eliminate the regulation bias that exists between the two kinds of businesses so that they can compete on an equal footing.
It can be asked which way of leveling what amount of regulation would generate the greatest social benefit — relaxing the degree of regulation on taxis or forcing Uber to operate on the same model as taxis.
First, taxi fare controls should be relaxed. In the past, the authorities were worried that taxi drivers would demand random fares or that taxi firms would engage in price wars. However, the Uber model has already proved that flexible fares can protect consumers’ interests.
Second, although Uber claims that it is creating work opportunities through a sharing-economy model, it operates like a taxi firm with respect to its drivers who work more than a certain number of hours per day.
That being the case, Uber should buy insurance for its drivers and be subject to the Labor Standards Act (勞基法), otherwise it would in effect be depriving its drivers of their labor rights.
Other matters, such as the approval of Uber drivers’ licenses and buying passenger accident insurance, should all be subject to laws and regulations to fully safeguard passenger safety.
Until the Tsai administration stated its position, Uber refused to register itself as a transport company and submit to regulation, and it claimed that no government in the world regulates this kind of newly emerging service.
However, now that both China and the Philippines have introduced laws to regulate online ride-sharing services and the Taiwanese government has stated its position, Uber has changed its tune, saying that it would like the government to amend the law by adding the category of “network transport service business,” and it launched a petition to that effect.
This shows that Uber is fully aware that its competitive advantage arises from regulatory bias and that it has been trying to resist being brought under regulation, so as to maintain its competitive edge. Faced with emerging services, the government should adjust the legal and regulatory structure so that new and traditional operators can compete fairly on an equal basis.
Sticking to convention or imposing severe penalties would not only fail to eliminate emerging services, but would send the traditional services to the chopping block along with the new ones, while consumers lose their right to choose. This would be thoroughly counterproductive.
The cases of Uber and that of Chinese video-on-demand provider iQiyi, which has not been able to register as a company in Taiwan, highlight the government’s policy conundrum in cross-border services. While not wanting to register Taiwanese companies in other nations, the government insists that overseas companies register in Taiwan.
While wanting to attract capital, the government puts all kinds of obstructions on potential investors’ path. If it lacks sufficient understanding of questions surrounding competition and convergence between OTT and existing businesses, and lacks policy targets of fair competition, it will end up failing completely.
Imposing a NT$25 million fine is no solution. What the ministry should do is to propose — as soon as possible — other amendments to the Highway Act, such as adding the category of network transportation services, specifying their rights and responsibilities and relaxing the existing regulations on taxi businesses — especially fare controls — so that the two kinds of businesses can compete on the same legal basis.
Jessica Chou is a professor of information management at Yuan Ze University.
Translated by Julian Clegg
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