The CNMC challenges in court the taxi regulations in the cities of Malaga and Cordoba
The High Court of Andalucía has declared admissible the actions brought by the CNMC against taxi regulations in the cities of Malaga and Cordoba.
• The municipal ordinances restrict competition maintaining and strengthening the monopoly in the taxi market.
• The restrictions could entail a loss in consumer welfare of at least 4.4 million EUR per year in Malaga and 2.5 million EUR per year in Cordoba.
Madrid, 26th of January of 2016. The High Court of Andalucía (TSJA) admitted the appeals brought by the CNMC (Spain’s National Authority for Markets and Competition) against Malaga and Cordoba taxi ordinances. The CNMC considers they restrict competition, perpetuating and strengthening the monopoly in the provision of taxi services, and reducing welfare.
Prior to the appeal, on 23st of July 2015, the CNMC required the Councils of Malaga and Cordoba to modify or remove the changes they had introduced in their ordinances. This requirement has not been attended and, consequently, the CNMC has challenged the two regulations in Andalusia’s High Court.
The CNMC is entitled to challenge in court administrative acts and regulations that restrict effective competition.
The main restrictions, which have been challenged, are the following:
• Quantity restrictions. The councils set the maximum number of taxi licenses that can operate in the municipalities, limiting access to the market and restricting free enterprise. This decision hinders entry, segments the market, reduces the availability and the variety of vehicles, increases the average waiting times, and restricts competition between operators.
• Price restrictions. The regulation sets up a regulatory unjustifiable fixed price regime that prevents operators to compete freely in the price of taxi services, to the detriment of consumers.
• Participation of taxi license holders associations in the administrative decisions regarding the number of taxis or the level of prices. This administrative procedure facilitates regulatory capture processes and the possibility for operators to coordinate themselves in order to restrict competition, damaging consumers.
• Unjustified requirements on the organization of the operators. Among others, the taxi regulations require the licensee to be a natural person or a member of a cooperative, limit to a maximum of one the number of licenses which can be owned, and require the license owners to be exclusively dedicated to the provision of taxi services.
• Unjustified requirements for quality and safety, such as a maximum age limit of two years old, among others.
All these restrictions limit effective competition, lack an economic justification, reduce welfare and are contrary to the regulatory framework for the defense and promotion of competition. In particular, the quantitative limits and the inability to compete on price, create a monopoly in the provision of taxi services, which is very costly in terms of welfare. The unjustified restrictions that have been challenged at court should be removed, in order to facilitate the use of new innovations in the sector, establish a system of free entry and facilitate price competition in the market taxi.
The Economic Reports prepared for this judiciary process indicate that the restrictions identified could entail a loss in consumer welfare of at least 4.4 million euros per year in Malaga and 2.5 million euros per year in Cordoba. These economic calculations are based on conservative estimates, as they do not incorporate other damages such as higher average waiting times for consumers or productive and dynamic inefficiencies arising from the monopoly.
The CNMC is entitled to encourage competition and promote efficient economic regulation as is it set out in the Law 3/2013, of June the 4th, creating the CNMC and Law 20 / 2013 of 9 December, to guarantee market unity. The jurisdictional challenge is an instrument to promote competition, improve regulation and increase welfare.