Uber Did More Good Than Harm to the Transport Market

Ministry of Finance agency sees Uber as an innovative and positive for society

In the duel of taxis, the Uber impaired individual transport market? Apparently no. A survey released on Friday (11) by SEAE (Secretariat for Economic Monitoring of the Ministry of Finance), the service that “connects drivers to passengers” innovated in the market, reaching consumers who did not use this type of transport.
The technical note was issued at the request of the office of Consumer and Economic Order of the Federal Public Ministry, due to the representation against Uber action formulated by the Brazilian Association of Taxi Drivers (Abracomtaxi). The MPF has asked the Seae demonstration on the effects of Uber operation on competition in individual passenger transport market.
The Abracomtaxi requested the MPF measures to curb Uber activity in the country.Among the demands was a ban on using the service in the country or out of it and the summons of Apple and Google to remove the application of its stores “aimed cease violating the law.” Thus, the association wanted to “avoid further damage to the taxi drivers and users.”
According to the association of taxi drivers, Uber cause “social instability and legal uncertainty to taxi drivers and users,” the application actually not be regulated. They also argue that Uber drivers do not comply with any requirement set out in the legislation to provide the service, such as identification of vehicles, regarding the tariff policy and the accreditation and supervision of drivers by the government.

What Did Seae

Before disclosing the note, the secretariat stressed that Uber “enables drivers and users to access commercial passenger transport in a different way from the traditional,” not fitting in existing regulatory designs.
In an assessment of the individual passenger transport service, on both sides, the technology and the impacts of competition innovations, SEAE decided that Uber is beneficial to consumers. The agency also noted that the regulation, if necessary, should be minimal and may not create barriers that impede the Uber operating model.
The technical note is composed of several parts that, in assessing the secretariat, define the role of the Uber. According to the agency, the know-how (occupation) of Uber is not employ drivers and own vehicles, but “reveal the potential of the existing transport infrastructure”, and meet the demand “repressed” of individual transport. The SEAE believes that the market is not well served by public transport or conventional taxis.
This model applied by Uber, according to SEAE, is innovative and has helped to expand the market for AVP services (rental of private vehicles). The rivalry in this market, the result of competition between the Uber and taxi drivers, was understood by SEAE as contestation of the market individual transport service, which is dominated by traditional taxi drivers.
In this context, SEAE says that competition is beneficial for society as it allows the population to choose which individual transport passenger service will use: taxis or AVP. “Therefore, the introduction of applications and the eventual growth of AVP […] service are pro-competitive, which, in theory, improve the welfare of consumers,” added the agency.
Finally, analyzing the dynamic price pricing model Uber, SEAE considered a good choice because it balances the supply and demand efficiently. The dynamic price rises the rate in a specific area if there is a lot of people asking Uber cars to ensure that passengers have a car at any time, “encouraging more drivers to connect to the application,” the company said.

… Regulation of Taxis?

The SEAE also defended the regulation of traditional taxi services to improve the market.As an argument, the agency cited a 1984 study (!) Of the Federal Trade Commission (FTC), which regulates commercial practices in the United States. In it, the FTC identified imperfections in the taxi services market.
The study said that the entry of regulation not sustained in order to avoid congestion, and the establishment of minimum prices was not justified. That is, two features present today in most Brazilian cities were already considered outdated for more than 30 years for a consumer protection agency.
Competition between taxi and Uber, according to SEAE, the introduction of the Uber market pressures taxi drivers to improve their services, which also affects the government, you need to do new regulatory approaches – in this case, to improve the performance of taxi drivers, not restrain and restrict the activity of Uber. With this in mind, the secretariat suggested some measures to improve taxi service.
Among the suggestions is the abolition of the restriction on the number of taxis on the streets, to ensure that the amount of readily available is in balance with market demand. SEAE also proposes a tariff deregulation, freeing the prices of taxi services and setting a maximum rate, to allow internal competition through prices.
It said it also inhibits any abuse of prices by taxi drivers, we know that often happens in places of great events. Along with this measure, they advise greater price transparency, which must be visible to the consumer. With the end of the flat rate, the agency recommends that each taxi application can set the price (or at least the competition between taxi drivers within the application).
Amid a document with several other suggestions to improve taxi services, such as encouragement of technological innovation and free access to taxi stands, SEAE’s message is clear: it is not the Uber that has to fit the new model . Let me finish the post with an organ observation: “The competition, coupled with the differentiation of these segments, acts as a regulator of this market, as it allows consumers to exercise their right of choice.”