The great Swedish taxi rip-off

With taxi rip-offs on the rise, Doug Lansky takes a look at how this un-Swedish practice started, why it’s allowed to continue, and what you can do to protect yourself from the scam.

• Congestion charge means costlier taxis (24 Jul 07)
• Two thirds fail Swedish taxi licence test (5 May 07)
• Swedish tax board attacks taxi tax dodge (11 Oct 06)

In October of this year, Göran Orbe, a police officer in the economic crime division, was at Stockholmsmässan, the city’s international fair facility, when a taxi arrived carrying an American dentist attending a convention.

“The dentist complained he had been ripped off,” says Orbe. “He had unknowingly taken a private taxi, which looked identical to the ‘regular’ taxis he had taken before, and the driver was demanding he pay 400 kronor for a ride that normally cost him 200 kronor. I could sympathize with him, but the private taxi had the law on his side.”

Officer Orbe has heard many such taxi complaints over the years, mostly from Swedish and international tourists visiting Stockholm.

“The classic is cruise ship passengers who arrive at Värtahamnen and pay 1,700 kronor for a taxi ride to Gamla Stan – normally a 120 – 150kr ride. Then there are many tourists who are told the meter is showing the price in euros or dollars, and they pay it. The highest example I know of personally was a Japanese tourists who paid 450 euros (4,600kr) for a ride from Stockholm center to Arlanda airport."

What’s the limit on what these private taxis can charge? There was a case in 1996 for excessive charging, and the County Administrative Board won the case because the taxi was hiding the cost from the customer. But this was before the 1998 requirement to have prices displayed on the taxi windows.

“Now there is no limit,” says Kari Björkqvist, a lawyer who oversees the regulation of the meters. “As long as the amount listed on their window matches what they have on the meter, they can make the price whatever they like.”

“It’s mostly a big city problem,“ says Rolf Arbin, Stockholm County Administrative Board’s director of commercial traffic. “It’s happening in Stockholm, Gothenburg, Malmö and doesn’t affect the smaller towns. But the number of these taxi scams in cities is increasing.”

How did this happen? The taxi industry was deregulated in 1990 due to frustration. “The government controlled the number of taxis allowed and there was a shortage. People couldn’t find a taxi in the rain or during public holidays,” explains Rolf Karlsson of Taxi Kurir, Sweden’s largest taxi company. “Now there are 50 percent more taxis.”

Yes, after deregulating the industry, the number of taxis went up. But a few strange results have emerged as well. For starters, competition from small taxi companies hasn’t driven the price down, as most anticipated.

Instead, the big taxi companies (Taxi Stockholm and Taxi Kurir, which also now owns Taxi 020) have similar, almost non-competing rates, and many of the small taxi companies made their prices ridiculously high to prey on uninformed passengers -- typically unsuspecting tourists who come from cities like New York or London, where taxi fares are regulated and there’s no reason to be picky about the type of taxi to take.

To further confuse the tourists (and drunk Swedes emerging from bars) many of these private taxis use names and logos similar to the big three companies.

According to Kicki Erkers, press spokeswoman for Taxi Stockholm, they’re trying to steal the confidence people have in the major companies. “We have many legal trials underway at various stages -- more than 10 per year -- with small taxi companies that try to make their taxis look too similar to ours And we monitor the names of new companies.”

The deceit of these fribilar/fritaxis (private taxis) couldn’t be more obvious. “They make their money by hiding their excessively high prices from the customer,” says Mattias Grundström of the Swedish Consumer Agency (Konsumentverket), who agrees that tourists, the most likely to get ripped off, aren’t going to spend time on their holiday to report an overpayment and wouldn’t know who to call even if they wanted to.

Another trick, according to Rolf Arbin, is to reorder their rate cards and meters so that the basic cheap rate “Taxa 1” is the most expensive rate and Taxa 5 (normally reserved for late at night and on holidays) is the cheapest, so passengers think they’re getting the cheap Taxa 1 rate all the time.

It all seems rather un-Swedish. What happened to the country world renowned for its socially responsible regulations? And how have other far less regulated cities and countries managed to impose set maximum taxi fares that protect the consumer from such rip-offs?

There are a few reasons why Sweden hasn’t done much about it. For starters, most Swedes have figured out the rip-off long ago, avoid it by simply taking their favorite taxi company, and are now blind to the issue. (And the tourists don’t complain enough to constitute a voice for change.)

The more interesting reason is that, in a bizarre twist, the deregulation has created an oligopoly. The solution to these tourist rip-offs has been to keep these private taxis away from key tourists areas, like the main taxi queues at Central Station. Many key transport hubs bought the idea. Now the big companies have cornered the market on some of the best taxi spots where they get exclusive access (or nearly exclusive) to Swedish travellers as well as foreigners.

If deregulation created this oligopoly, might regulation create competition? Yes.

And, as far as the big taxi companies are concerned, that seems to be the problem. If the government starts regulating prices, they’d actually destroy this oligopoly. Think about it. If these private taxis were no longer ripping people off with crazy fares, there would be no reason to expel them from the airport, ferry terminals and train stations. No wonder the major taxi companies are such big supporters of deregulation.

Now, you might argue that with regulated fares, there would be greater confidence in taxis and more tourists would probably take them. (Many tourists and visitors can’t remember which are the “safe” taxis, so they just skip the taxi ride completely). But, if you’re one of the major taxi companies, what’s more important: losing a few dozen taxi rides a day to tourist confidence or a few thousand at Central Station and other spots that keep the private taxis away?

“New Zealand deregulated taxi prices before Sweden,” explains Rolf Arbin. “And that system failed. But they fixed it. We’re going to start by trying to fix the Taxa 1 switch scam, but if that doesn’t do the trick, we’re going to have to ask the politicians to make a max price. Or do what New Zealand has done and make the private companies join the big ones, which will force them to uphold certain standards and prices or the whole company risks losing their license.”

“The taxi pricing is a jungle,” says Jonas Svedlund, a taxi driver for Taxi Varmdö. “I need at least 10 rides to make the day profitable. Some of the inner-city drivers make closer to 20 short rides. But these rip-off drivers can get by on just one or two fares per day. It seem like a max price would offer more fair competition.”

Seems like it’s time for the government to make a distinction between regulating the number of taxis on the road and regulating the price. And because it will actually improve competition, it should be an idea even the Moderates can get behind.
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HOW NOT TO GET RIPPED OFF

1. Only ride with companies you recognize, even if they’re not at the front of the taxi queue. It feels criminal not to take the first taxi in the queue, but that’s what Stockholmers do. (These Stockholm taxi companies meet the membership standards of the Taxi Association: Taxi Stockholm, Taxi Kurir, Taxi 020, Top Cab, Varmdö Taxi, Ekerö Taxi, Norrtälje Taxi, Roslags Taxi, Taxi Nynäs, Södertälje Taxi.

2. Some of the private cars look similar to the larger taxi companies – so check to see that the driver has a valid license and there is a “jämför” (comparison) price on the window to be sure. It should be around 230kr on the low end and 280kr on weekend/holidays.

3. Make sure the driver is using the correct rate for that time of day. Some drivers have switched the Taxa 1 rate (which should be the lowest) with a higher one. It should be listed on their rate card.

4. If you already know the basic rate to your destination for various times of day, you can agree on a fixed price. If not, stick to the meter.

5. Ask for a receipt, just in case you want to attempt to get a refund or make an official complaint.

This advice has been compiled from information received from Ejert Seijboldt (Swedish Taxi Association), Anders Wedberg (Swedish Road Administration - Vägverket) and Rolf Arbin (Stockholm’s County Administrative Board)
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STOCKHOLM TAXI STATS
5,500 taxis
3,000 companies
40 - 45 central dispatches
1,000 fribilar (private taxis)
Source: Rolf Arbin (Stockholm’s County Administrative Board)
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WHAT IT COSTS

NAME	Start price	LOWEST 10km	HIGHEST 10km	FIXED TO ARLANDA
Taxi Kurir	38kr	225 kr	275kr	490kr
Taxi Stockholm	45kr	227kr	285kr	495kr
Taxi 020	39kr	136kr	277kr	490kr
Top Cab	45kr	235kr	275kr	475kr
Taxi Varmdo	36kr	227kr	261kr	(not listed)
Taxi Transfer	*	*	*	450kr

(*Doesn’t use meter, only fix prices. But roughly 85kr for 1st 2km, then 30kr per km, which should produce a comparison price of 325kr)