The largest ride-hailing company in the world acquires the largest taxi booking and dispatching technology platform in the UK, and the whole world is watching. No wonder it is – the deal of this size isn't closed every day. But this takeover might be more than an interesting industry case study. It doesn't impact only Uber and Autocab, but somehow, all of us: the whole taxi & ride-hail industry, along with the suppliers and users. So why is this acquisition worthy of our attention? And shouldn't we do more than just watch?
When Uber Acquired Autocab
It's August 2020 when Uber unveils the big news: the acquisition of a UK company called Autocab, the largest supplier of booking & dispatch systems in the world that enables digitalisation for more than 1,500 taxi companies.
Uber announced that the move should influence neither Autocab's iGo platform nor the apps of Autocab's customers that are built with Autocab technology.
However, people who order rides via the Uber app in smaller UK cities will now be connected with local drivers. When you open the Uber app in Oxford, Exeter, or Plymouth, the 'Local cab' feature now connects you with local taxi companies.
Despite Uber's promise to stay away from Autocab's business, the UK watchdog, Competition and Markets Authority (CMA), launched an investigation.
So What's the Problem? The 'What If' Scenario
The CMA found only indirect competition between Uber and local dispatchers. However, the case was maintained under future investigation — because Uber is not just a taxi dispatch operator like any other.
As the CMA report points out, Uber can leverage Autocab's data for its own benefit, enabling it to spot market trends and opportunities to offer more efficient and more profitable services.
More importantly, there's no guarantee in the long term that Uber won't launch a service with its own drivers in those smaller UK cities. This would make Uber a direct competitor also for the supply capacity to the local providers who use Autocab.
Control over prices, service providers’ profits, and commission fees are powerful weapons Uber could leverage to its advantage against local providers.
Be it faster pickups or cheaper rides, better service conditions will make the customers gravitate towards Uber. And local drivers will, naturally, follow.
More Than a Regular Taxi Dispatch Operator
Direct competition at the moment is unlikely. For Uber, the acquisition opens an opportunity that offers much more than unequal (and borderline legal) competition with local providers.
According to Autocab's CEO, Safa Alkateb, instead of solely providing ride-hail services, Uber's ambition is growing to be “the Amazon of ground transportation” and joining the list of fast-growing aggregator companies, like Booking.com.
So how can we expect this acquisition to unfold?
The Reasonable Scenario: Aggregation - and Monopolisation, Inevitably
Aggregated marketplaces such as Amazon always bring positives for both customers and suppliers, especially in the short term. Customers (or buyers) can expect better services, like shorter pickup times resulting from increased capacity availability.
At the same time, service providers (or sellers) can benefit from more job opportunities for the drivers, higher operational efficiency through higher utilisation, or new resources for innovation.
However, over time, the aggregating platform tends to dominate over others and maximise control on the market with two key negative effects.
First, striving for profit maximisation, the owner of the demand – the aggregator – influences prices for the end-users, likely implementing pricing policies that include predatory pricing or price increases.
Second, it’s the demand owner who decides where and how the services will be provided, as well as how the fees for service providers will look.
This scenario thus doesn't guarantee that the customers win. The lack of competition can condemn them to unsatisfactory taxi services resulting from too few alternative taxi options.
Misusing its power and position towards both service providers and buyers to its advantage, Uber can have more customers and higher profits than ever before – at the expense of taxi companies.
And once demand aggregates under the Uber brand, traditional taxi dispatching companies are nothing more than fleet operators and capacity providers. Such a middleman is deprived of any demand ownership, and therefore, the business valuation decreases.
If this reminds you of earlier lines about unequal competition, you're right. Because after all, the two scenarios might not be that different from each other. Becoming a direct competitor or global aggregator, Uber in any case gains a large competitive advantage that puts the market under its control.
The Cure? Transparent, Accountable, and Regulated Marketplaces
Banning aggregation isn't as straightforward as the monopoly ban, plus we wouldn't want to ban it fully. Still, compared to traditional companies and industries, it's more difficult to regulate new digital platforms – because they are often hard to define, categorise, and they develop very quickly.
But here’s a solution; new and smart ways to approach the creation of aggregated markets – so that such marketplaces grow open with a reasonable level of governance that allows for fair competition among sellers.
In practice, this requires transforming proprietary, closed, and exclusive platform infrastructures into accessible and non- discriminatory. This can be done by opening software, its protocols, and non-personal data or by providing access to the order book.
This might sound unrealistic with established aggregators, but the earlier development stages provide more space for intervention. Setting rules earlier in the game increases their application; the birth of an open marketplace requires a proactive approach through transparency, followed by agile regulation.
Yes, there will still be winners – owners of such global marketplaces. However, the negative effects can be limited, monopolisation prevented, and a fair trade inside such a marketplace governed.
Governance and Separation of Duties
Just the right amount of governing regulation ensures that innovation and economic growth of the industry are not inhibited, but that the negative externalities of a closed marketplace monopoly are minimised.
In the taxi & ride-hailing world, governance can effectively ensure that the aggregation of taxi services will bring passengers good- quality and affordable taxi rides – just like they benefit from cheap and accessible vacancies on Booking.com.
In a closed marketplace environment, a marketplace owner tends to want to own both sides of the transaction - buyers and sellers. Ownership means to control, enabling maximization of the owner’s interests at all times.
Making each of key roles, marketplace owner, demand owners and supply owners separately accountable is one the most efficient tools to ensure fair play even within an aggregated market.
These separated accountabilities will guarantee fair treatment to both sides of the transaction taking place through the marketplace, sellers and buyers, as well as other stakeholders, like city residents who are highly impacted by the ride-hailing & taxi market.
Demand Owner and Quality Guarantee
The privilege of owning demand shouldn't come without the responsibility for providing service quality and availability.
In the first place, demand owners should be motivated to avoid “cherry-picking” – focusing on the most profitable orders or geographical areas. Instead, they should get closer to the way public transport operates to contribute to more equitable urban transportation systems at large.
In practice, it requires increasing taxi serviceability in cities to increase equitability. That would include serving even the demand in areas that may not be unit profitable. But instead of making capacity suppliers take the "burden" of serving these non-unit-profitable areas, the demand owners should take this burden themselves (and for instance compensate the capacity suppliers for it). Just as they enjoy the advantages of serving the profitable areas. Fair play.
Moreover, demand owners should guarantee and foster fairness towards and between suppliers. Practically speaking, demand owners will prefer neither suppliers who are able to pay a higher commission, nor their own brand supply.
The fulfilment of these demand owner duties should be monitored and controlled digitally, while any non-compliance should be penalised. This way, the needed regulation of private hire vehicles can become more flexible, fair, and granular – reflecting current situations within time windows as brief as one hour in hyper-local, small residential areas.
And if that feels too utopist, think of how we mitigate a similar negative externality— pollution. The Emission Trading system makes it possible both to monitor and penalise the production of greenhouse gases. Companies that aren't willing to comply with environmental regulations are charged with a fee known as carbon credits.
So similarly, if for example, mobility service providers don’t comply with providing quality services in underserved areas, they could also be penalised with a fee.
Collaborative Supply Owner
Supply owners should be accountable for minimizing their negative impacts on all stakeholders. What it means for the ride- hailing & taxi industry is having a positive balance towards sustainable transportation and city liveability.
A supply owner who churns out more and more cars into the streets without optimizing for their utilization does not act responsibly. To increase utilization is to be open to receiving more demand regardless of the origin. Supply owners need to open their capacity booking capabilities and allow for any demand owner transacting within the marketplace to connect and order a ride.
And at the same time, they should manage the supply capacity and adjust the fleet size to the fleet utilisation so that the supply owner will provide only as many cars as can be utilised at the time. Moreover, it requires suppliers to respect limitations for the size of their driver base.
And what’s left for the marketplace owner to be accountable for? Firstly, to open the data at reasonably aggregated levels that will enable governing bodies to measure and enforce any regulation put upon the ride-hailing & taxi industry while at the same time, protecting the privacy of passengers and drivers as transacting parties.
And secondly, to allow any buyers (including demand aggregatory channels) and sellers (including supply aggregatory channels) to transact within the marketplace under non-discriminatory rules.
Furthermore, digital tools provide us with many possibilities to monitor and control the fulfilment of such duties – and again, on a far more granular level than ever before.
And the Result?
The separation of duties brings positive outcomes for all key stakeholders: customers, individual drivers, taxi operator business owners, and importantly, all residents of the cities where we live.
Passengers can enjoy good-quality services, even in areas that aren't necessarily profitable, at an affordable cost.
At the same time, drivers and taxi operators will be able to provide services for reasonable prices with reasonable vehicle utilisation, benefiting from the fair-play market environment.
And finally, everyone would benefit from the decrease of negative externalities associated with urban transportation.
Regulating aggregators can be a key contribution to improving urban transportation at large. Better utilisation of fleets and better ride-hailing services can reduce the number of cars in our cities. This reduces congestion and CO2 emissions, so we'll end up with healthier and happier residents in more liveable, cleaner cities.
However, it is naive to anticipate such positive development without any intervention. Changes of this range do not just happen organically. And here, our responsibility as a mobility sector to observe, analyse, and act comes again.
Once we agree on the approach to regulation, plenty of new questions arise. Who should lead this regulation? How to set the regulation up so that it wouldn't be discriminatory towards any of the involved parties? And how should compliance with such regulation be controlled and enforced? Those could be some, to begin with.
Juraj Atlas is the co-founder of the largest Czech ride-hailing company, Liftago. With his current project Mileus, they provide technology for intermodal transportation that combines on-demand transportation services with public transport for rapid, yet sustainable growth of taxi & ride-hailing operators and more liveable cities. Mileus was ranked Top 5 Intermodal Mobility Solutions by StartUs Insights.