Ridesharing service Uber is a step closer to being legalised in Victoria following a controversial ruling of the Victorian County Court, and subsequent calls for community input into a Parliamentary Inquiry on ridesharing services. This paves the way for Uber to operate legally in Victoria for the first time since its introduction in early 2013, and makes Victoria the most recent state to consider regulating ridesharing services.

However, the licensed taxi and hire car industry has widely criticised both the ridesharing movement and the Victorian government for bowing to public pressure and allowing ridesharing operators to act ‘unfairly and cheaply’ – and in doing so undermining the framework of rules and laws regulating the commercial passenger vehicle industry in Victoria. While Uber pushes for ‘sensible, safety-based regulations’, the commercial passenger vehicle industry is calling for taxi plate government buy-backs and compensation.

What has happened since our last article?

ACT: As detailed in the previous article we published on this subject, the ACT was the first among Australia’s states and territories to legalise Uber, successfully regulating Uber and other ridesharing companies in October 2015 by permitting them to operate within the existing schemes applicable to taxis and hire cars. The ACT regulating system foregrounds the importance of public safety, employing measures such as background checks, vehicle inspections and insurance requirements for drivers.

NSW: The NSW government quickly followed the example set by the ACT, legalising ridesharing services in December 2015. While the NSW regulations require checks similar to those established in the ACT – for instance, Uber drivers being required to have criminal and car-safety checks – NSW also took steps to assist traditional cab drivers transition into the newly competitive market. With access to a $250 million ‘industry adjustment package’, and exclusive access to cab ranks and ‘hail jobs’.

SA: The decision to legalise Uber in SA was made in April 2016, with the service becoming legal on 1 July. However, Uber’s introduction into SA was not as seamless as in other states. Uber has criticised the SA government for implementing prohibitive legislation, and requiring steep start-up costs. While this issue continues to be hotly debated, both Uber and the SA government have, to this point, been satisfied with the price and efficiency of the required screening processes.

VIC: Most recently, the push for regulation of ridesharing services has reached Victoria. While no legislation has been formally announced, the Victorian government is edging closer to regulation, and has gained the cooperation of the Sex Party in developing the proposed regulations. The Victorian government has called for submissions to a government inquiry on the likely impact of officially regulating ridesharing services – and has sought to boost the powers of the Taxi Service Commissioner – in response to a controversial decision of the Victorian County Court which ‘effectively legalised’ Uber in May of this year.

What was the impact of Brenner v Taxi Services Commissioner on Uber regulation in Victoria?

Chettle J’s decision in Brenner v Taxi Services Commissioner highlights the fact that the laws governing the operation of commercial passenger vehicles in Victoria are (to some degree) outdated and in need of change. In August 2014, Uber driver Nathan Brenner was fined by two undercover Taxi Service Commission Investigators for operating a commercial passenger vehicle without the necessary license, authorisation and accreditation. Mr Brenner was found guilty in the Melbourne Magistrates Court of operating as a commercial driver without proper accreditation, was ordered to pay the prosecution costs of the Victorian Taxi Commission, and was offered a lower fine on the condition that he would not continue to work for Uber. The ruling sparked a public statement from Uber, which described its disappointment with the decision of the Magistrates Court, and declared its intention to support Mr Brenner in his appeal to the County Court. Mr Brenner was ultimately successful in his appeal against conviction and sentence.

The County Court’s decision turned on the interpretation of s 159 of the Transport (Compliance and Miscellaneous) Act 1983 (Transport Act), which was described by Chettle J as an ‘unintended anachronism’ within the legislation. In essence, s 159 provides that if the defendant is able to prove each passenger in the vehicle in question did not pay a separate and distinct fair, then the vehicle is not a commercial passenger vehicle. Construing s 159 as such causes the section, when applied, to undermine the enforceability of licensing requirements where there is more than one passenger in the vehicle, and the passengers pay together. As it is the practice of Victorian Taxi Service Commission Investigators to work in pairs, the decision means that the Victorian Taxi Services Commission will not be able to commence new prosecutions or issue infringement notices for commercial passenger vehicle offences, such as operating unlicensed or driving without accreditation.

This decision also frustrates the regulatory tactics of the Victorian Taxi Services Commission against ridesharing service providers in a broader sense, eliminating the Commission’s primary method of redress for breaches of the Transport Act.

Currently, the Transport Act refers to breaches of its provisions by ‘owners’ and ‘drivers’. These breaches trigger fines, which are paid by Uber rather than the driver who received the fine. However, Uber maintains it does not provide transport services, but instead facilitates the introduction between customers and drivers. Further, Uber does not own and lease vehicles to drivers, but instead charges for access to the Uber platform, which allows customers to access and order drivers. Uber is therefore ‘once removed’ from its drivers, and while it may be argued the Uber app enables a breach of the Transport Act (by connecting unauthorised, unlicensed and unregistered commercial vehicle drivers with passengers) arguably, there is limited scope for the Taxi Services Commission to prosecute as Uber itself is not in breach of the Transport Act.

How are taxi drivers compensated?

One of the central issues in the fallout of the Brenner case has been the level of compensation, if any, the Victorian government should award to Victorian taxi drivers whose licenses are devalued by the legalisation of ridesharing service providers.

Those in support of compensation argue the uncertainty regarding the operation of ridesharing, and the threat of the competitive entry of ridesharing service providers like Uber, have upset market expectations and negatively impacted the sale of perpetual licenses. It is argued that the Victorian government has effectively compulsorily acquired the licenses, and as such is obliged to pay ‘fair’ compensation. Further, supporters of the proposed compensation scheme insist that other reforms which intend to support the value of perpetual licenses – for instance by supporting Taxi operators’ ability to compete with ridesharing service providers through reduced costs, access to new booking services, and preserving the Taxi operators’ exclusive right to ‘rank and hail’ services – will be ineffectual and insufficient on their own.

Despite the fact the compensation proposed by the Victorian government ($100,000 for the first license, $50,000 for the second) is far more generous than the $40,000 compensation cap in NSW, the NSW government underlined the support and compensation of struggling taxi license holders as a priority. Recognising the potential impact the regulatory changes have on taxi and hire car licence holders, the NSW government has created a $250 million fund to assist licence owners in adjusting to the new regulatory framework. The fund is regarded by the government as equitable assistance for those in the industry who have spent their savings, and invested their superannuation, on taxi licenses. The NSW fund is drawn from consolidated revenue, and supplemented by a temporary point-to-point fee applied to Taxi, Hire Car and ridesharing services of $1 per trip for a maximum of five years. Service providers may choose whether to pass this cost on to the customer. At the same time, costs for taxi and hire car operators are being reduced with lower license fees and other cost heavy regulations removed, equivalent to $30 million a year in administrative savings for the industry

Conversely, opponents to compensation argue that Victorian Taxi drivers have neither a legal, nor a moral entitlement to compensation. From this perspective, holding perpetual licenses as an investment is an endeavour subject to risk-reward trade off. It is argued that the language of the regulations surrounding the licenses – which are traded privately – indicate the licenses are subject to the risk that regulatory changes can reduce the license value. Further, opponents to compensation argue that license holders who purchased licenses before 2012 have already received the benefit from the licences, being the income streams generated from the leasing or operation of those licenses over time. License holders who purchased after this time did so at a time when regulatory change was foreshadowed, and therefore would have been aware of the greater risk they were taking on.

This approach to compensation may be seen in the ACT government’s attitude toward compensation. The ACT has not yet implemented a compensation scheme. The ACT government acknowledged that Government-owned licenses, and the changes to annual lease fees of those licenses, might place downward pressure on lease prices within the ACT generally, and therefore undermine the value of perpetual licenses. However, it was of the view that this negative impact had been offset by the reduction in license fees flagged by the ACT Government’s 2010 review, giving investors ample time to decide how best to manage their investment. Even so, the ACT government intends to monitor the industry’s response to the legalisation of ridesharing in the ACT, and consider further arrangements once there is greater clarity as to the industry impacts. Moreover, government fees will be reduced and although regulated maximum fares for Taxis will be maintained initially, competition outcomes will be monitored with a view to eventual deregulation.

Compensation in Victoria

Although the approach to compensation in Victoria is still being debated, Victorian Premier Daniel Andrews has outlined the likely features of the Taxi License compensation package and the reforms to the commercial passenger industry. These include:

  • $378 million made available to provide assistance to licence holders to help the transition to the new legislative framework
  • a $75 million Fairness Fund to provide targeted support to those in the industry who are experiencing immediate financial hardship as a result of the reforms, including $25 million to improve access to point-to-point transport for people with a disability
  • all taxi, hire car and ridesharing services to charge a ‘trip-tax’, equivalent to $2 per trip to fund the transition to the new system, including support for existing licence holders during the transition
  • all drivers accredited by the Taxi Services Commission will include passing police, medical and driving history checks, and all drivers will be subject to ongoing criminal data matching.
  • rank and hail work to be available to those taxi providers that meet stringent requirements, including cameras and fare meters
  • the Taxi Knowledge Test abolished, to be replaced by a simple system of industry-driven driver training and accountability.

These proposed changes to taxi and hire car regulations reflect the submissions received by the Parliamentary Inquiry into ride sourcing services, and the regulatory examples provided by NSW and ACT. The proposed changes obscure the differences between ride-sharing services and taxi and hire cars, creating a level playing field for the commercial passenger vehicle industry. These reforms propose that rideshare vehicles obtain a hire car licence in order to undertake booked work through accredited Network Service Providers, like Uber. The changes will therefore increase the red-tape burden for Uber and ‘partner drivers’.

Given the lack of definitive legislative change, the roll out of the new regulatory scheme in Victoria is yet to be finalised. It has been proposed that the first amendments to the Transport Act will made in early 2017, with the final legislative framework being introduced in early 2018. However, until these changes are officially made, the position of ride-sharing services in the taxi and hire car regulations is still tenuous.