GTA Rate Review Chairman’s Recommendation

The Chairman has opined… 2

What did he say? 3 The GTA represents a complex commercial compromise that seeks to reflect the concerns on both sides and involves and reflects a wide range of factors, including but not limited to, the following: –The level a court awards. –The savings each party might achieve through avoiding litigation. –The benefit to Insurers from agreed protocols for monitoring and control of hire period. –The benefit to CHOs of protocols which offer an incentive for Insurers to settle cases quickly and make prompt payment. –The benefit to CHOs of protocols preventing Insurers from intervening to offer a courtesy car once the innocent driver has become the CHOs’ customer and thereby curtailing the period of hire.

What did he say? 4 My decision in respect of the Rates for commercial vehicles, private hire and taxis and motorcycles is that there should be no change. In my view there is insufficient evidence to justify a change (down or up) at the present time.

What did he say? 5 I took the view that I would be assisted by the input of an independent economist. On reading their report I have reached the following conclusions : –the data and economic submissions of the insurers need treating with a very great degree of caution –the materiality of the various criticisms by the CHOs is not uniform but it is possible for sufficient of the CHOs criticisms to be proved such that it would no longer be possible for Oxera’s figures to found a basis for a reduction from the Rates.

What did Nera say? 6 “Biases inherent in Oxera’s method that suggest it may overstate the disparity between the GTA and car hire from mainstream suppliers for at least some postcodes and potentially for all of its results.” “Our review suggests that Oxera’s results may rely on at least some hire rates for vehicles which are not available in practice. If Oxera’s dataset contains phantom vehicles that affect its measure of the lowest available rate, its analysis would not accurately reflect the prices reasonable consumers would pay for vehicles.”

And the CMA… 7 I would add that the need to proceed with caution in all matters relating to data has been emphasised by the recent CMA report on “Short-term car rental in the European Union”. I note the various comments that have been provided to me in The Report does add to my concerns about data. This general environment is one where matters are not always as they might seem.

And the answer… 8 Balancing the Stevens downward pressure on the one hand, with the lack of safe and solid evidence on the other, my recommendation is that the Rates for car hire should be reduced by 5% for the current year, with an Implementation Date to be decided by the TC.

And going forward… 9 Next year’s review should start in the autumn and the implementation date bought forward to enable an early review, on better evidence than currently available, taking into account evidence of the true impact (or otherwise) of Stevens. Each party should (a) provide a data set for scrutiny and (b) instruct economists to review both data sets and then negotiate on the basis of the economist’s reports. If agreement proved impossible, mediation or arbitration or a revised GTA procedure could follow. This could be a foundation for the future of the GTA which could be amended to provide for a review more often than once a year, or that there should be a review whenever the TC decided that was merited by the circumstances.

So what happens next… 10 The GTA TC meets on 27 th August where the issues are: –Did subscribers agree with his recommendation? –Can he impose if if they didn’t? –Do the TC have to vote on the issue and, if so, is unanimity of the TC required? –Can (do) 25% of subscribers want to appeal (a) his recommendation or (b) any decision taken on the 27 th August? –What do insurers think and what comes next? The Chairman has gone off to get counsel’s opinion because of our very serious concerns about competition law and the imposition of price fixing on an entire industry predicated on “the lack of safe and solid evidence.”

The $64 million question 11 We need your answer to one single question ‘Do you accept the Chairman’s recommendation for no change to bikes, taxis and commercial vehicles and a 5% reduction in GTA rates for all other vehicles?’

Interlude… 12