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Plans to launch an international taxi-booking app to compete with Uber Technologies Inc. hit a roadblock Monday when Australia's antitrust watchdog said it was likely to oppose the move.

Taxi payments company Cabcharge Australia Ltd. and local taxi networks have teamed up with Minneapolis-based Taxi Services Inc. to launch an international smartphone app called iHail in Australia, the U.S. and the U.K.

However, the Australian Competition and Consumer Commission issued a draft determination Monday proposing to deny the joint venture authorization to launch the app in Australia.

"The ACCC considers that the iHail app would have a significant impact on competition in the taxi industry, which could impact prices and quality of service," said the commission's chairman, Rod Sims.

The decision is a major blow to the industry's fight against Uber and other ride-sharing services. iHail would have allowed passengers to use the same app to find the nearest taxi wherever they are instead of needing to navigate various apps servicing different locations and brands.

While the app would have made booking taxis more convenient for passengers, it would have been "too big a cost to competition", Mr. Sims said.

The commission's concerns stem from the proportion of the market that will be captured by the app. The regulator estimates iHail's initial shareholders—including Yellow Cabs, Silver Top Taxi Service, Black and White Cabs and Suburban Taxis, as well as Cabcharge, itself Australia's biggest owner of taxi brands—represent more than half of all taxis in the country, and a larger share in the metropolitan areas where the app would operate. With more taxi services potentially joining the app, its dominance could shut out smaller existing taxi-booking apps, such as go Catch and ingogo.

The regulator is also concerned that the taxi-payment processing industry could be harmed. Under the iHail proposal, passengers will only be able to pay for fares booked with iHail through the app, with Cabcharge processing all payments. Customers won't be able to pay in the taxi.

"The ACCC is concerned that this requirement will shut out opportunities for Cabcharge's competitors to provide noncash payment processing services to ihail customers, and that this would significantly reduce competition between taxi payment processing providers more generally because emerging providers would have a reduced customer base that they could compete to supply," Mr. Sims said.

The service also allows passengers to offer to pay an extra upfront payment above the metered fare at the time of requesting a taxi, to encourage drivers to accept bookings over other fare requests. The regulator said that feature could diminish access for poorer people during peak hours.

Uber, which has signed up around 15,000 Australian drivers, said it welcomed the regulator's interim decision to "put consumers first and reject the taxi industry's latest attempt to shut out competition".

Hundreds of taxi drivers vented their anger in simultaneous protests on the streets of Sydney, Melbourne and Brisbane in September at the growth of unregulated ride sharing companies, which they say are destroying their industry and livelihoods.

Dennis Julian, secretary of the Australian Taxi Federation, which represents drivers and taxi owners around the country, estimates taxis have lost about a third of their business in most major cities since the UberX ride-sharing app launched in May last year.

Cabcharge Chief Executive Andrew Skelton said there is significant competition in the market from similar apps. He said having mandatory in-app payment was "nothing new" and that Cabcharge providing the payment gateway was no different to this function being provided by a bank.

"A number of apps already operate in this way, offering a streamlined experience for the passenger," he said. Mr. Skelton said Cabcharge, which holds a 10% stake in the iHail joint venture, would proceed with plans to launch proprietary apps for its own taxi services.

The commission said it would seek submissions from interested parties before making a final decision in November or December.

Write to Rebecca Thurlow at rebecca.thurlow@wsj.com

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(END) Dow Jones Newswires

October 12, 2015 07:45 ET (11:45 GMT)

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