Who Has the Right of Way? California Moves to Regulate Ride-Sharing

Who Has the Right of Way? California Moves to Regulate Ride-Sharing

by Michelle Kaminsky, Esq., September 2013

Ride-sharing companies and their associated smartphone apps have been operating in cities across the country, especially on the West Coast, for years—and taxi drivers and unions have been unhappy about it for just about as long. Recently, however, California became the first state to take steps to address the ongoing concerns of taxi unions, which claim that such businesses are cutting into their own profits because there is no regulation of ride-sharing activities.

Taxi drivers such as William Rouse, general manager of Los Angeles Yellow Cab, assert that the ride-sharing companies provide “essentially the same that we are without complying with all of the regulations that we have to comply with.” Taxis that are regulated by unions must comply with standards regarding emissions, licenses, and fares, among others. Because ride-sharing companies are not subject to the same limitations, goes the argument, they are able to provide similar services cheaper, making them attractive alternatives for those who need rides—and unfair competition to taxi drivers who do have to follow rules.

Ride Sharing Goes Unregulated

Ride-sharing apps, such as Lyft, Uber, and Sidecar, allow users to find rides from strangers via Facebook; by paying a small donation and going through the app, users can secure a ride to his or her destination without calling, waiting, and paying for a taxi.

Up until recently, the activities of ride-sharing companies have gone unregulated because they didn't fit into any existing category, such as taxis (though some taxi drivers and unions would dispute this lack of categorization). Indeed, San Francisco taxi drivers have even made citizen arrests of ride-sharing drivers, sent cease-and-desist letters to app companies, and held a rally at city hall to protest such activities.

One Los Angeles taxi company has taken a different route in combatting ride-sharing's effect on business by creating its own app. Bell Cab Co., Inc. has partnered with Flywheel Software Inc., based in San Francisco, to develop an app that puts the traditional cab company on similar footing to ride-sharing drivers.

Classifying Ride-Sharing Services

In response, the California Public Utilities Commission (PUC) has created an entirely new classification for ride-sharing services: Transportation Network Services (TNCs), which would make such companies be required to comply with rules regarding insurance ($1 million minimum in liability), background checks for drivers, drug tests, and more. The PUC has reportedly explicitly given permission for ride-sharing companies to operate statewide despite the fact that the city of Los Angeles has sent cease-and-desist letters to ride-sharing companies.

John Zimmer of Lyft believes the regulations would only make ride-sharing safer, more affordable, and more efficient, all benefiting consumers.

Some taxi drivers, though, including Rouse, are still not convinced, and believe the ride-sharers should simply be considered taxi drivers and be subject to the same rules without the creation of a separate legal category for them.

On September 19th, however, the PUC voted 5-0 to approve the nation's and state's first-ever rules for ride-sharing companies, effectively preempting California cities like Los Angeles from attempting to ban ride-sharing.

For now, at least, it seems ride-sharing will remain a valid option for those looking to get from Point A to Point B so long as an ride-sharing app is available for that area. Whether this changes in the future thanks to pressure from taxi unions in California and elsewhere remains to be seen.