Tag Archives: Ryan Lawler

D.C. tries again to protect taxi industry from competition

Last year, the D.C. City Council threatened to impose regulations that would have effectively barred Uber, the popular sedan-hailing car company, from the D.C. market. In a surprising show of candor, the proposed legislation admitted that the goal was to ensure that the politically powerful taxi lobby didn’t lose any business. Public reaction was swift and negative and the council eventually relented, letting Uber into the market.

While many were celebrating, I played the part of the skeptic, noting that Uber’s gain seemed to have come at the expense of other start-up transportation companies. Writing in the Washington Examiner, I noted:

But when you dig into the legislation, it appears that the council earned Uber’s praise by — you guessed it — finding a way to privilege Uber. That’s because the legislation mandates that “public vehicles-for-hire using a digital dispatch service shall be licensed.”

As tech reporter Ryan Lawler points out, the licensing requirement erects a barrier to entry for other businesses. SideCar, for example, is a West Coast service that, according to its website, “instantly connects people with extra space in their cars with those who need to get from one place to another.” It is, they say, “like a quick and hassle-free carpool.” Since these instant carpoolers are obviously not licensed, they’d be illegal in DC. That’s handy for Uber. The company managed to cross the regulatory velvet rope and, alongside taxis, obtain access to a lucrative market. But once inside, Uber put the rope back up.

I’m sorry to say that my skepticism was warranted. This morning, WAMU’s Martin Di Caro reported:

The commission that regulates all vehicle-for-hire services in the District of Columbia once again finds itself at odds with a tech start-up.  After battling the sedan service Uber in 2012 before creating a sedan class license to allow the company to operate legally in the District, the Taxicab Commission has notified SideCar management that its drivers may not pick up passengers in D.C. without the proper licenses and vehicle tags.

“Individuals who join this rideshare operation must be licensed taxicab or limousine drivers in the District of Columbia and must have vehicles that have L tags,” said Commission Chairman Ron Linton.

You can listen to the full story here.

Step one in obtaining government privilege is to have a seat at the table

The weekend edition of the WSJ featured an interview with Uber founder Travis Kalanick by Andy Kessler. It offers a nice lesson in how regulatory bodies can get captured by incumbent firms. In city after city Kalanick and his team encountered regulations and regulators intent on privileging the established taxi and luxury limousine industries.

The interview touches a bit on the Uber experience with the DC Council, (which I first wrote about back in July):

…the city tried to change the law—with what were actually called Uber Amendments—to set a floor on the company’s rates at five times those charged by taxis. “The rationale, in the frickin’ amendment, you can look it up, said ‘We need to keep the town-car business from competing with the taxi industry,’ ” Mr. Kalanick says. “It’s anticompetitive behavior. If a CEO did that kind of stuff—you’d be in jail.”

In the end, the city backed away from its proposal, allowing Uber to operate without the requirement that it charge 5 times what its competitors were charging. So far so good. Unfortunately, however, the legislation that gave Uber access to the DC market also mandated that any firm wishing to serve that market be licensed. As I wrote in The Washington Examiner in December, this adds one more chapter to the story:

As tech reporter Ryan Lawler points out, the licensing requirement erects a barrier to entry for other businesses. SideCar, for example, is a West Coast service that, according to its website, “instantly connects people with extra space in their cars with those who need to get from one place to another.” It is, they say, “like a quick and hassle-free carpool.” Since these instant carpoolers are obviously not licensed, they’d be illegal in DC. That’s handy for Uber. The company managed to cross the regulatory velvet rope and, alongside taxis, obtain access to a lucrative market. But once inside, Uber put the rope back up.

The incident raises questions about how much responsibility firms bear for the privileges they enjoy. I honestly don’t believe Mr. Kalanick set out to obtain a privilege for his firm. The problem is that once he had safely passed through the maze of red tape, he hardly had an incentive to ensure that anyone following him got through. And, of course, he even stood to gain if no one did. The simple fact is that when the deal was hashed out, Mr. Kalanick was at the table while the folks at SideCar (and hundreds, if not thousands of other would-be startups) were not. This is how regulatory capture works.

DC Council Chooses to Privilege Uber AND Taxis

Last week, the DC City Council backed off on its plans to hand a regulatory privilege to the DC taxi industry. Last July, the Council had considered adopting legislation that seemed tailor-made for the taxis. It would have required luxury “sedan-class” vehicles, which compete with taxis, to charge no less than five times (!) the rate that taxis charge. The legislation directly challenged Uber, a popular service that allows customers to summon clean and reliable sedans to their location using a cell phone app.

Like Emily, I was excited to hear that the Council had come to its senses. But then I read the legislation. As I wrote in this weekend’s Examiner:

To be sure, this is a significant improvement over what council members were considering. They will not be regulating a valuable consumer service out of existence so that a well-connected taxi industry can maintain its precious monopoly. But when you dig into the legislation, it appears that the council earned Uber’s praise by — you guessed it — finding a way to privilege Uber. That’s because the legislation mandates that “public vehicles-for-hire using a digital dispatch service shall be licensed.”

As tech reporter Ryan Lawler points out, the licensing requirement erects a barrier to entry for other businesses.

For the full story, including some info on what the taxis got in return, click here.