The competition watchdog plans to block Cabcharge and local taxi companies from teaming up to start a new smartphone taxi booking app as a rival to Uber because it would come at "too big a cost to competition".

In a major blow to the established industry's fight against Uber and other ride-sharing services, the Australian Competition and Competition and Consumer Commission said the iHail app would have a "significant impact on competition in the taxi industry, which could impact prices and quality of service".

Uber, with 2.4 million local users, has rocked the taxi industry

Cabcharge and its partners wanted to launch the iHail app in Australia's major metropolitan and regional centres as early as July. The iHail app was aimed at allowing passengers to book the closest available to them, regardless of which taxi network the driver belonged to.

While the app would make booking taxis easier for passengers, ACCC chairman Rod Sims said the regulator believed it would be at "too big a cost to competition".