Legalising Ride-Sharing Services

Legalising Ride-Sharing Services

Taxi-booking services such as MyTeksi and Easy Taxi, as well as ride-sharing booking services such as Uber and GrabCar, have been touted as the game changers as they set to revolutionise and transform the taxi-booking system and practice in the taxi industry.

These ride-sharing services leverage on smartphone technology to connect passengers to drivers in a reliable, affordable and safe way. Many have lauded the introduction of these services into the market as they set to solve the taxi woes, end the frustration and ease the pain when it comes to booking a taxi.

Features such as real-time GPS tracking and cashless payment system on these services give a greater level of confidence, convenience and security to passengers and drivers.

Protests and Bans

The reality is, change often brings resistance. The ride-sharing business model is not short of controversy.

Uber is facing a number of court cases worldwide and its service is banned in several countries. Incumbent taxi drivers are up in arms, claiming that Uber engages in unfair competition and bulldozes its ways through the system by using drivers and cars not licensed/authorised by law.

Some have claimed that as these drivers do not have passenger liability insurance, this will put the passengers’ safety at risk. Authorities around the world continue to crack down on Uber’s and GrabCar’s drivers and some drivers had been unfortunately harassed and attacked by other taxi drivers.

Legality of Ride-Sharing

MyTeksi and Easy Taxi are essentially taxi-booking services, where passengers can summon taxis through mobile apps. They both work with licensed taxi drivers, and do not charge passengers anything extra.

Passengers will pay the metered fare as regulated by the government. From the look of it, it appears that they work within the boundaries of the law.

Uber and GrabCar, on the other hand, are described as ride-sharing services. Uber and GrabCar partner with private vehicle owners, licensed for-hire chauffeur-driven limousine and commercially licensed rental car companies. Their drivers do not use a taxi meter, but rather they use a mobile app to calculate fares based on distance travelled and time is taken, which apparently are much cheaper than the regulated metered fare.

In Malaysia, there is no express prohibition under the law which prohibits someone from using a software to connect its users to drivers for rides on private cars.

Under the Land Public Transport Act 2010, no person shall operate or provide a public vehicle service using a class of public service vehicles unless he holds an operator’s licence issued under the Act.

A person is deemed to be operating or providing a public service vehicle service if he uses or drives a public service vehicle or employs one or more persons to use or drive a public service vehicle and he owns the said vehicle or is responsible to maintain or operate the said vehicle. “Public service vehicle” includes a motor vehicle used for carrying persons on any journey in consideration of a single fare.

It appears that Uber and GrabCar do not fall within the above scope.

Uber and GrabCar also claim that they are just a technology company that facilitates the ride-sharing services and not a transportation company. Their drivers, however, appear to fall within the above scope and are potentially liable under the Act, which attracts fine up to RM10,000 and/or imprisonment up to 1 year. Their vehicles can also be confiscated.

Legalising Ride-Sharing Services

Governments in several jurisdictions have taken steps to create a regulatory framework for the ride-sharing market. In the US, California is the first jurisdiction that legalizes the ride-sharing services through the creation of a new category of public transportation service known as “Transportation Network Company” (“TNC”). A TNC is a company that uses an online-enabled platform to connect passengers with drivers using their private vehicles.

Some of the conditions that must be met before a company can be licensed as a TNC include driver background checks, driver training, minimum insurance coverage, the maximum age limit of the vehicle, the requirement to install a GPS tracking device, etc.

The TNC model ensures a level playing field is established by preventing ride-sharing services from undertaking specific taxi related activities (rank, hail, pre-booked and cash transactions). A High Court in London recently delivered a landmark judgment, saying that Uber’s app does not operate in the same way as “taxi meter”, and therefore Uber’s service is not considered as providing taxi service.

In May 2015, the Philippines became the first country in Asia to legalise and regulate the ride-sharing services nationwide by adopting California’s TNC model. In Singapore, the Third-Party Taxi Booking Service Providers Act 2015, which regulates taxi-booking services, came into force on 1 September 2015. The Singapore Government has also announced that the next phase will involve the review of the ride-sharing services.

On 8 October 2015, Didi Kuaidi, the largest ride-sharing company in China, received the first official car booking license for its ride-sharing service from Shanghai’s Municipal Transportation Commission.

According to the regulations, Didi Kuaidi is required to do in-house screening and training of all its potential drivers as well as to make sure that all the private cars registered on its platform are certified and properly licensed by the authority and that each vehicle, driver and passenger must be insured. Uber China is said to be actively preparing documents for its own application in Shanghai. In Australia, ride-sharing companies will be able to legally operate in the state of Canberra from 30 October 2015 onwards.

In Malaysia, a Bill to amend the Land Public Transport Act 2010 is expected to be tabled in Parliament in October 2015.

The amendments would include provisions to regulate mobile app providers offering any public transport, commercial transport and delivery services as well as to deal with mobile apps that facilitate car-pooling or the charging of passengers using unlicensed vehicles.

It would be interesting to see if the Bill is a move to legalise ride-sharing services or a move to allow the authorities to exert control over taxi-booking and ride-sharing companies and take action against them if they are found to have breached the law.


Ride-sharing services continue to be popular and it is quite clear that they are here to stay.

Since its launch in San Francisco in 2010, Uber has extended its service to 60 countries and more than 300 cities around the world. Passengers choose ride-sharing services because of its convenience, safety and transparency. There are also many people who choose to become ride-sharing drivers so as to supplement their income.

It is time for our Government to recognize that the continued growth of ride-sharing services shows that there is a demand for an alternative point-to-point transport option.

Rather than banning such services, the Government should facilitate it by adopting an innovative regulatory framework that protects the safety and interest of the public while encourages the market to deliver real competition, spur technological innovation and improve efficiency as well as productivity.

About the author:
This article was written by Edwin Lee Yong Cieh, Partner of LPP Law – law firm in Kuala Lumpur, Malaysia (+6016 928 6130, [email protected]). Feel free to contact him if you have any queries.
This article was first published in CHIP Magazine Malaysia.
The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.
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