Accusations of Ride-Hailing Monopoly in the EAEU
Ride-hailing companies stifle competition in the taxi markets of the member states of the Eurasian Economic Union (EAEU).
This is the bottom line under this year’s investigation by the department for antitrust regulation of the Eurasian Economic Commission (EAC), its press secretary Medet Akhmetov emailed. Particularly, the department’s analysis revealed the ride-hailing companies intervene in the carrier-client relationship by means of a pricing algorithm.
The investigators also stated that this and other misconducts have negligible influence on the cross-border markets, thus, taking actions against them is out of EAC’s control. In October 2021, the case file was transferred to the member states’ national antitrust authorities.
The decision was expected yet dissatisfactory, argued Stanislav Shvagerus, head of competence center at International Eurasian Forum Taxi: “At the EAEU level, the regulators’ responsibility is limited to the cross-border markets not applicable to such urban markets as taxis. So, the department’s reasoning is logical yet it doesn’t resolve the concerns.” This use case is yet another example, globally, that antitrust authorities still have issues handling the adverse effects of the emergence of digital platforms.
Digital markets are prone to monopolization because the gig economy players gravitate towards the largest platform. In the EAEU’s taxis, Yandex plays this part. Russian antitrust authorities estimate that its market share exceeds 70% and even 80% in many larger cities in Russia and Kazakhstan. It enjoys market power in various ways. When the provider had lifted its commission in this August, effectively, it raised the market’s base-level tariff. In another instance, its aggressive discounting while expanding to Kazakhstan resulted in the overall lowering of fares. Its automatic algorithm decides who gets a ride while its often-criticized policies towards new drivers have become, effectively, the industry standard.
Hypothetically, a carrier can choose another service provider from a handful of the rivals or seek a direct relationship with consumers. Yet, freedom is an illusion, said Shvagerus, because of the leader’s huge advantage over other players.
The interviewed experts suggested that Yandex merely follows an organic win-or-die behavior typical for the digital players worldwide, necessary to survive in such an environment. Particularly, Chinese DiDi is now using the same strategy while expanding to the EAEU’s market. However, the antitrust authorities cannot respond effectively because the state legislation treats the taxi and the ride-hailing markets separately, Shvagerus said. In fact, Yandex often stresses that it seeks to play strictly by the book. “Unless the new antitrust package is issued, accounting for the emergence of the digital markets, antitrust authorities of any country can do little,” he said.
“Generally, our business association acknowledges that aggregation of taxis and emergence of ride-hailing services results in more convenience of booking and payments for consumers,” said Medet Kurmanov, chairman of the Nur-Sultan Transport Association. “However, we believe that, if such players gain the power to influence pricing and distribution of trip orders, they should be properly regulated by either antitrust and road authorities.” By his thinking, ride-hailing companies must be registered as such and share responsibilities with carriers. Also, the authorities should watch fares, commissions and order dispatching of the companies holding more than 30% of the market.
Shvagerus sees a promising use case in Moscow. This August, the city authorities had launched a municipal digital platform aimed at regulating the drivers’ working conditions and obedience to the rules, mandatory for all taxi drivers and ride-hailing providers. Unfortunately, no data is available, to the date, on its effect on road safety and overall satisfaction in passengers and drivers.
Nevertheless, he argued that the EAEU’s open borders require measures at the interstate level. Ride-hailing companies’ power is partly founded on the flow of migrant worker from poorer rural regions to the cities. In fact, one-in-four such migrants to Russia and Kazakhstan work as taxi drivers, many of whom lack any qualifications for this role. “Such a driver can have a fake license or be physically or mentally disabled, prone to violence or hiding from another country’s law,” said Kurmanov. “Safety of such trips is no-one’s responsibility.”
Meanwhile, weak interstate cooperation diminishes the national authorities’ ability to effectively respond. In this part, the regulators’ global experience is even more scarce, emailed Anna Pozdnyakova, research fellow, and Daria Kotova, expert at BRICS competition law and policy centre of HSE University. Before the EAC’s investigation, only one interstate competition lawsuit against shared mobility platforms was completed in EU.
The EAEU’s authorities should embrace the concept of the single market instead of cross-border markets, Shvagerus suggested. Also, an interstate digital platform is needed to monitor the market players. “This question was first raised at the EAEU level back in 2019,” Shvagerus said. “However, the task is complicated and a it’ll take time to get actual changes.”
