Competition Authority - Discussion Paper No 6

The Competition Authority today (01 December 1998) published a sixth paper in its Discussion Paper Series. In the paper entitled 'Solving Dublin Taxi Problems 'Prof. Patrick McNutt, Chairman of the Competition Authority and Mr Patrick Kenny, Economist at the Authority, in a radical departure from the conventional wisdom on how to solve Dublin's taxi problem, argue that the transferability of taxi licences brought about by legislation in 1978, should be removed.

The taxi problem in Dublin is characterised by a secondary market for taxi plates. As demand for taxis has progressively increased in the city, profits accruing from owning a taxi plate have increased, driving up the price of taxi plates on the secondary market. The 1978 legislation which placed a limit on taxi plate numbers, created an incentive for a secondary market and this transferability, in effect, created the secondary market in taxi plates. Such transferability should be removed. Any phased path to total entry deregulation, without removing transferability, is simply not going to work. If we are serious about the taxi problem in Dublin, the transferability of taxi licences must be removed.

• Agreeing with most reports, McNutt & Kenny argue that the quantitative limits on taxis should be phased out in favour of a more liberalised pro-entry regime

• The problems associated with phased deregulation could be solved if the transferability allowed under the 1978 is revoked. This would have the immediate effect of closing down the secondary market in plates and investors would not be able to speculate as to whether the authorities would fulfil their stated intention to fully deregulate in 10 years.

• McNutt and Kenny would prefer a swift move to complete entry liberalisation but, in the absence of such a move, the revocation of the right to transfer the taxi plate is a necessary and inevitable step for any sustainable long term market outcome with entry liberalisation.

• According to McNutt and Kenny, a more efficient entry regime would create an avenue for people of limited means to enjoy the benefits of an enterprise culture and the free market while improving the availability for taxi users.

For further information please contact Prof Patrick McNutt on 087 238 1977 or Patrick Kenny at 01 804 5411