Peru is one of the last countries in Latin America to catch up with tech regulation and, in an attempt to rush through regulation, is at risk of stifling growth in the tech area. Taxi apps, in particular, are in danger of falling victim to overzealous legislation. In recent months, two bills have been submitted by members of the Peruvian congress aimed at regulating taxi apps. In essence, both bills propose that companies operating taxi apps: (i) hold liability in the provision of taxi services to the end user; (ii) must be registered in a public registry of tech platforms; (iii) must operate through a local office incorporated under Peruvian law; and (iv) must include on their platforms only those taxi drivers that comply with certain requirements set out in the proposed regulation.  

From a review of the bills' justification reports, it appears that such proposals are a response to cases in which taxi drivers have not provided an adequate service to consumers but without a full understanding of the type of service provided through these platforms.  

New tech gives market operators new tools to cover gaps in the provision of complex services. In Peru, where crime and accident rates among cab services are high, it's extremely valuable to consumers to have the ability to ID their drivers and check their records. As long as consumers can access information about taxi services, they can make more informed consumption decisions. Such information is not willingly provided by regular taxi services, but is readily available through apps. For this reason, many consumers prefer to pay a higher price in order to access a more complete service.  

However, some members of congress do not share the view that companies providing taxi applications do not render the taxi service themselves but merely act as an intermediary platform between taxi service providers and users, providing the latter with information they will not find through regular taxi services. Taxi applications therefore offer added value to users that the proposed regulation does not promote.  

What can companies do? Companies providing taxi service applications should proactively engage with relevant stakeholders, to provide more evidence of this added value they bring to society, including for consumers' welfare. For instance, through engaging in discussions with INDECOPI — the consumer protection authority in Peru and also the authority in charge of promoting the competition in the market — since Congress will likely request its opinion on this matter.  

While the bills are still under evaluation, it's likely that this regulation will eventually be implemented in Peru, following the trend of countries such as Mexico, Colombia and Chile. We hope that Congress pays attention to suggestions of how the proposed regulation can be improved, otherwise consumers, who are benefiting from the increased security offered through tax apps, may be negatively affected.   

Finally, important to note is that discussions regarding regulating such services have not been focused on the alleged unfair competition between app-approved taxi drivers and traditional taxi drivers (as has been the case in other countries). This may be due to the high percentage of unlicensed taxis in Peru (Lima has around 25% and other cities are likely to be higher). These unlicensed services represent a more significant threat for licensed regular taxi drivers than apps. This should be an additional reason to avoid inappropriate regulation of app based taxi services. These applications will help reduce unlicensed taxi services, which so far has not been achieved by government institutions.