Cabcharge Australia Ltd and US software firm Taxi Services Inc had planned to roll out their joint venture, the iHail app, in Australia, the United States and Britain.
Uber and other new competitors have put pressure on the traditional taxi industry to be more innovative as they steal a significant slice of the global market.
Cabcharge, which has watched Uber sign up more than one million customers since launching in Australia three years ago, was rushing iHail to the market.
"The ACCC accepts this app would provide a more convenient way for consumers to book taxi services, but ... this comes at too big a cost to competition," Australian Competition and Consumer Commission Chairman Rod Sims said in a statement on the preliminary finding.
The statement made no direct mention of Uber but noted "there are a number of apps that already provide access to large fleets of taxis (and) iHail will achieve a potentially dominant position ... not through competition, but because of the larger fleet of taxis its ownership structure delivers".
Uber has 15,000 driver "partners" across Australia, with a goal of 20,000 by the end of the year, while goCatch, which uses licensed taxi drivers, counts 30,000 of the country's 68,000 drivers as members.
The move is the second serious setback to Cabcharge's defence against Uber in the past month, after the Australian Capital Territory became the first state or territory to legalise Uber.
The ACCC said it would still take submissions, including from iHail, before making a final decision by the end of 2015.
A Cabcharge spokeswoman said the company was preparing a response.
Cabcharge shares were down 1.6 percent in a weaker overall market in early trading, having lost a third of their value so far in 2015.
© Thomson Reuters 2015
Catch the latest from the Consumer Electronics Show on Gadgets 360, at our CES 2026 hub.