Ridesharing: Regulatory landscape

August 29, 2014

Car technology automobileResidents of, and visitors to, many major cities have a plethora of ways to navigate those congested city streets: bus, subway, bike, and much to the chagrin of regulators, insurers, and taxis…ride-sharing. Well-known transportation network companies (TNCs) like Lyft, Wingz, Sidecar, and Uber, that make mobile apps for ridesharing, are creating regulatory headaches for many municipalities.

Taxi or Technology?

The threshold regulatory issue is the labeling of TNCs. For instance, TNCs, Uber and Lyft, self-identify as technology companies and not as taxi service companies. TNCs contend that because they do not hire drivers or own any cars, they are not car or taxi service providers. As a result, TNCs reason that they should not be regulated as taxi providers. Conversely, the taxi industry argues that because TNCs deliver commercial transportation services, they should be subject to the same rules that they are.

Currently, this labeling issue is playing out differently across U.S. cities. Some municipalities have established that TNCs’ provision of ride-sharing and taxi service place them under the same regulatory constraints as commercial practice; some have exercised flexibility in interpreting existing municipal regulation to accommodate TNCs; and others remain undecided.

Municipalities Weigh In.

Annapolis

This summer, Annapolis, Maryland ordered Uber to register as a taxi company before resuming ride-sharing services in the city. The Baltimore Sun reported that safety concerns played an important part in the city’s decision. In the article, Annapolis Mayor Mike Pantelides, stated: “I’m happy to know there is another means of transportation that will help increase our city’s mobility efforts, but I must also be diligent in insisting that they are regulated, just like our taxicabs, in an effort to keep our citizens and visitors safe.”

Denver

Last month, Colorado Governor, John Hickenlooper, signed into Senate Bill 125, which authorizes ride-sharing services into law. This law makes Colorado the first state to legislatively endorse and regulate TNCs as distinct entities.

Los Angeles

In 2013, the city’s department of transportation sent cease-and-desist letters to Uber, Lyft and Sidecar, which accused the TNCs of operating unlicensed commercial transportation services in Los Angeles. However, the State of California intervened and allowed TNCs to remain operational. Currently, the California legislature is considering a bill that would increase the insurance obligations of TNCs. Bill, AB 2293 by Assemblywoman Susan Bonilla (D-Concord) would require TNCs to ensure that its drivers and their personal vehicles have at least $750,000 in insurance coverage any time the driver uses a ridesharing mobile app to connect with a customer.

Minneapolis

The Minneapolis City Council legalized ride-sharing in July. The new ordinance distinguishes TNCs from taxis and creates a process for licensure and insurance. According to The Washington Times, the ordinance also creates a two-tiered fee structure for TNCs and taxicabs.

New York

New York’s attorney general recently filed a lawsuit to prevent Lyft from operating in New York. The suit alleged that the TNC operates as a traditional for-hire livery service using mobile technology, and not a peer-to-peer transportation platform as it claimed, reported The Associated Press. The suit further alleged that Lyft operates in “open defiance of state and local licensing and insurance laws”.

New Orleans

Uber has been preempted from setting up ridesharing shop in New Orleans as well. The Taxicab Bureau banned the Uber app from organizing any rides and issued a cease and desist letter which accused Uber of “illegally advertising for drivers, advertising for riders, and/or facilitating for hire and courtesy transportation in the City of New Orleans” before the TNC has even given its first ride. More recently, the City Council has considered allowing Uber into the New Orleans, but with substantial limits. A newly proposed city ordinance would allow Uber, Lyft, and other TNCs to operate in New Orleans under a minimum pricing structure. The ordinance proposes a minimum $25 charge for sedan rides, a minimum $35 charge for SUV rides and a flat $75 charge for rides to the airport in a sedan or $90 in a SUV.

Takeaways for Local Attorneys

The long-term status of TNCs and ridesharing is in flux across the U.S. Cities across the country are grappling with the myriad of issues such as consumer choice, competition, rider/driver safety, and insurance coverage posed by ride sharing, while the federal government remains silent. Accordingly, local attorneys must stay abreast of their respective city or state’s specific regulatory framework for now.