Accident towing licences are a scarce commodity, as the market to buy and sell them is highly regulated. It therefore comes as no surprise that licence holders were eagerly awaiting the release of a report into the industry, conducted by the Essential Services Commission Victoria (ESCV).

The ESCV’s Report

The ESCV were tasked with reviewing the economic regulation of accident towing services in Victoria. A draft report was released in September 2015, and the ESCV asked industry participants to provide their views on the draft findings and proposed recommendations.

The final report was then released in December 2015, following consultation with tow truck operators and drivers, industry and consumer organisations and insurance companies. Given this consultation, the final recommendations aim to promote reasonably priced and responsive towing operations, without undermining licence values.

The Value of Accident Towing Licences

The ESCV expected that the value of an accident towing licence would equal the expected value of future profits from accident towing activity. However, given the high market price of licences, the ESCV realised that other factors also influence their value.

VicRoads submitted that the real value in owning an accident towing licence is in securing smash repair work. This reflects the fact that accident towing is part of the broader towing industry. In reality, many tow truck operators have a close commercial relationship with independent smash repairers, including through co-ownership.

Key Changes between the Draft Report and the Final Report

In the final report, the ESCV substantially revised their chapter on consumer protection. In particular, recommendation 7 was removed, as stakeholders submitted conflicting views on its effect. Recommendation 7 would have limited the locations to which an accident damaged vehicle could be towed.

Generally, insurers such as Insurance Australia Group, Suncorp and the Insurance Council of Australia supported recommendation 7, as did the Consumer Action Law Centre. They contended that the simplified set of destination choices could help prevent unscrupulous operators ‘capturing’ consumers by touting for repair work at the scene of an accident.

Conversely, representatives of the Accident Towing Industry (ATI) generally opposed recommendation 7. The ATI submitted that it would impinge on consumer’s freedom to contract. Similarly, the Victorian Automobile Chamber of Commerce submitted that the rights of vehicle owners should prevail so that they can have their damaged vehicle towed wherever they choose.

In acknowledgement of these comments, the ESCV removed recommendation 7, stating that it may not be an efficient way to deal with the problems emerging downstream in the smash repair industry. This change is beneficial to the industry, as it should uphold the welfare of consumers, without undermining the value of accident towing licences.

Where to from Here

The ESCV’s review of accident towing is now complete. The final report has been provided to the Minister for Finance and the Minister for Roads, and is available to the public. The recommendations will only operate in practice, though, if the Government implements them through policy changes.
Importantly for tow truck operators, the ESCV suggested that the Government should consider the need for an inquiry into the wider smash repair market. No doubt accident towing operators will be interested to see whether the Government proceeds with such an inquiry, as it could also have an impact on the value of accident towing licences.

If you do need any advice or assistance in this area then please do not hesitate to contact Michael Bishop on 03 9614 7707.

[email_link]