The consumer watchdog is poised to knock back the taxi industry’s new smartphone booking app, designed to compete with Uber, because of fears it could dampen competition.

The iHail app is designed to consolidate taxi bookings from Cabcharge, Yellow Cabs, Silver Top Taxi Service, Black and White Cabs and Suburban Taxis, and represent more than half of all taxis in Australia, the Australian Competition and Consumer Commission said on Monday.

“The ACCC accepts this app would provide a more convenient way for consumers to book taxi services, but in the draft determination the ACCC takes the view that this comes at too big a cost to competition,” chairman Rod Sims said.

Sims said the ACCC estimated the initial iHail shareholders represented more than half of all taxis in Australia.

“This would guarantee that from its launch, the iHail app would have a larger fleet of taxis, in a broader range of locations, than any existing taxi booking apps,” he said.

“Depending on the rate of take up of the iHail app amongst other taxi networks, it could potentially grow to include all taxi networks in any area.”

The proposed “arrangements” for the app were “likely to produce significant public detriments”.

“They will reduce competition between taxi networks in supplying services using the iHail app and, the arrangements may tip the market towards iHail becoming the dominant booking app. If it becomes the dominant booking app, it may also reduce competition by impacting the commercial viability of existing apps operated by individual taxi networks, as well as those operated by third parties such as goCatch and ingogo.”

As with Uber, passengers using iHail would only be able to pay for fares through the app – not in the taxi. The difference with iHail is that Cabcharge would process payments while with Uber the payments are processed via a nominated credit card.

The ACCC was also worried about Cabcharge gaining a dominant position.

“The ACCC is concerned that this requirement will shut out opportunities for Cabcharge’s competitors to provide non-cash 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,” Sims said.

– with AAP