DC Seeks To 'Legalize' Uber... By Forcing It To Be Way More Expensive Than Cabs

from the can't-have-competition dept

Tue, Jul 10th 2012 3:03am — Mike Masnick

If you want to understand local corruption at a really, really deep level, do something simple: fly into a new city, hop into a cab at the airport and ask them about taxi licensing. I've done this a few times, and you'd be amazed at what a ridiculous situation this is. For reasons that still do not make any sense, most cities have very strict regulations on cabs -- which they always position as being for the protection of customers, but in reality are always about limiting the market and keeping competition out. Planet Money's discussion of NYC cab medallions last year highlighted just what a ridiculous system this is. It's almost impossible to find an economist who thinks this setup is good for the public. And yet it's quite common.

Over the last few years, a few startups have tried to disrupt this market -- and they always get attacked for it, either by local cab/limo services or the local officials in charge of regulating the market. The most well known of these companies is Uber, who is looking to really disrupt the market with a service that they admit is more expensive, but which provides really amazing convenience and service in exchange. Users of Uber love the service, in my experience. A couple weeks ago, I was in Chicago to speak at a conference, and Uber's CEO, Travis Kalanick, spoke at the same event, with a really entertaining talk -- much of it about how every time he tries to disrupt a market, legacy players get really, really pissed off at him.

As part of that talk, he discussed the situation in Washington DC, where the local Taxicab Commission Chairman, Ron Linton, ran a "sting" to claim that Uber was violating DC laws. Since then there's been a lot of back and forth in the fight in DC, leading to a new set of regulations that are being introduced. Of course, as is typical of taxi/limo regulations, they often say one thing but mean the exact opposite. In this case, the Taxicab Commission appears to be positioning the new regulations as being designed to make Uber "legal,", but, as Uber's Kalanick notes in a blog post, it includes some really poisonous provisions that require Uber to charge at least 5 times what a taxi charges. They're not even subtle about this. As the text of the bill reads:

(c) (1) The minimum fare for sedan-class vehicles shall be five times the drop rate for taxicabs, as established by 31 DCMR § 801.3 (a).

(2) The time and distance rates for sedan-class vehicles shall be greater than the time and distance rates for taxicabs, as established by as established by 31 DCMR § 801.3 (b) and (c).

The DC Taxicab Commission claims this is to "ensure that sedan service is a premium class of service with a substantially higher cost that does not directly compete with or undercut taxicab service." But why? We don't do this in any other market. We don't tell nice restaurants that they must charge more than fast food restaurants, so as not to compete. We don't tell Apple that it must charge more for computers so that they're seen as "premium" devices. We let the market work things out. That's what enables disruptive innovation and competition to take place.

What's amazing here (and, to a lesser extent, in nearly every major city in the US) is how they effectively admit that they don't want competition, they don't want innovation. They want a protected market that is artificially inflated. Why would the people of DC accept this kind of thing?

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Filed Under: cabs, car service, dc, disruption, innovation, regulations, taxis
Companies: uber

47 Comments

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relghuar, 10 Jul 2012 @ 3:22am

why would people put up with this?
Umm, just a wild guess...
Because most of them are lazy ignorants who don't give a shit, as long as tomorrow is the same happy day as yesterday?
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Anonymous Coward, 10 Jul 2012 @ 3:43am

because its the Law
and Law == Good
always
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The Old Man in The Sea, 10 Jul 2012 @ 4:10am

How to make a profit as a cabbie!!!
Many long years ago, I used to drive a taxi (during my days at Uni). The biggest problem we faced as drivers was the incessant demand to keep raising fares because the taxis were not bringing in enough to be fully profitable. Every time the fares increased by 5% we lost 6% of our customers. It would take months before some of these lost customers would return. We would never see the same level again. We, the drivers, were continually making less each month, which is the main reason I gave up diving a taxi.

Setting the minimum fares for the new services at 5 times just makes them entirely unprofitable. The secret to making money in driving a taxi is the flagfall. If you can get enough of these an hour, every hour, you will make more than doing long trips. But you have to make the service cheap enough that people will be willing to call a taxi for any and all trips. Having enough taxis to service the market and making sure that the drivers are properly trained and are courteous and pleasant will ensure that there is a good response by the general public.

I know that there are problem with runners and muggers, but this can be mitigated.

But to set up the system to force a newcomer to fail will only cause more people to forego using the existing services. But stupidity is not only reserved for the RIAA and MPAA and their ilk.

regards and good evening to all.
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Jimmy, 10 Jul 2012 @ 4:18am

because democracy fails in DC
most of the DC population is lower class, undereducated citizens that vote based on irrational perceptions and have probably never heard of most of the political issues that make news in the city throughout the year. that's how a mayor who was once a civil rights leader can ride that accomplishment to getting caught snorting coke off a hooker's *ss and still manage to get reelected. and a place where a city councilman can get away with saying:

�We�ve got to do something about these Asians coming in, opening up businesses, those dirty shops. They ought to go, I�ll just say that right now, you know. But we need African-American businesspeople to be able to take their places, too.�

the problem is exacerbated by the fact that DC is a very transient city. a lot of the educated people living here either weren't around during the last local election cycle, won't be around for the next, or never even register to vote in the city (e.g. military, students, etc). solution: none. this city is perpetually f'ed.
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Anonymous Coward, 10 Jul 2012 @ 4:25am

But will they legalize gay uber?
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Anonymous Coward, 10 Jul 2012 @ 4:31am

Re: because its the Law
A typical generic response from a typical generic person, who neither cares nor questions the "morality" or "intention" of any given law.

I guess sheep, dont care unless it enefits or is at risk of lossing something

You are the sheep, morality the herder, corporation mentality are the snakes and poison apples of the world, and youve just been bitten while eating the apple.

Dont accept every spoonfull blindly, open your eyes and confirm what you believe in, and ALWAYS be vigilant in doing so

And if you remotely benefit from laws like these being passed, then fcuk off little snake, peace be with you
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Anonymous Coward, 10 Jul 2012 @ 4:34am

Re: Re: because its the Law
weak through the valley of the darkness, for he is truly his brother's keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy My brothers. And you will know I am the Lord when I lay My vengeance upon you." Now... I been sayin' that shit for years. And if you ever heard it, that meant your ass. You'd be dead right now. I never gave much thought to what it meant. I just thought it was a cold-blooded thing to say to a motherfucker before I popped a cap in his ass. But I saw some shit this mornin' made me think twice. See, now I'm thinking: maybe it means you're the evil man. And I'm the righteous man. And Mr. 9mm here... he's the shepherd protecting my righteous ass in the valley of darkness. Or it could mean you're the righteous man and I'm the shepherd and it's the world that's evil and selfish. And I'd like that. But that shit ain't the truth. The truth is you're the weak. And I'm the tyranny of evil men. But I'm tryin', Ringo. I'm tryin' real hard to be the shepherd.

Oh noess copyright infringement right here folks, lock me up and throw away the key, the law is the law, or should i say, the laws proposed but not yet set, IS THE LAW
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Anonymous Coward, 10 Jul 2012 @ 4:34am

Re: Re: because its the Law
Your sarcasm meter is broken.
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Anonymous Coward, 10 Jul 2012 @ 4:36am

Re: Re: Re: because its the Law
no seriously, have it calibrated or something...
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Anonymous Coward, 10 Jul 2012 @ 4:36am

Re: Re: Re: because its the Law
oppss thats embarasing, i missed a it

Jules: There's a passage I got memorized. Ezekiel 25:17. "The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Blessed is he who, in the name of charity and good will, shepherds the -------------weak through the valley of the darkness, for he is truly his brother's keeper and the finder of lost children. And I will strike down upon thee with great vengeance and furious anger those who attempt to poison and destroy My brothers. And you will know I am the Lord when I lay My vengeance upon you." Now... I been sayin' that shit for years. And if you ever heard it, that meant your ass. You'd be dead right now. I never gave much thought to what it meant. I just thought it was a cold-blooded thing to say to a motherfucker before I popped a cap in his ass. But I saw some shit this mornin' made me think twice. See, now I'm thinking: maybe it means you're the evil man. And I'm the righteous man. And Mr. 9mm here... he's the shepherd protecting my righteous ass in the valley of darkness. Or it could mean you're the righteous man and I'm the shepherd and it's the world that's evil and selfish. And I'd like that. But that shit ain't the truth. The truth is you're the weak. And I'm the tyranny of evil men. But I'm tryin', Ringo. I'm tryin' real hard to be the shepherd.
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abc gum, 10 Jul 2012 @ 5:05am

DC, where it is illegal to dance in public.
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Josef Anvil (profile), 10 Jul 2012 @ 5:06am

Not much to see here
The taxi business has been corrupt for as long as I can remember. The reason it's hard to disrupt is because of all the local political corruption involved. The funny thing about it is that the politicians feel so safe about this level of corruption that they feel free to say blatantly stupid things.

For any politician to say they are legislating higher fees to ensure a premium class of service is just complete bullshit. They could have left that phrase out and just said they need a legal barrier to entrance into the market.

I think the real story here is the sting operation that was done to scare the potential workforce from working with Uber. They even planned the sting so that it would force the driver to lose an extra day of income. These are the people who say they are concerned about our economy and welfare. Nice.
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Anonymous Coward, 10 Jul 2012 @ 5:39am

Every legacy industry works like this in every city in every "capitalist" (and many not so capitalist) economy.

It's hard to understand from a theoretical perspective, but practically, it is the adaptation that has made capitalism stable enough to stave off the communist (r)evolution.

Free-market, classic capitalism by its very nature is too unstable to support large-scale, long-lasting civilizations - there's way too much churn, boom and bust, creative destruction, winners and losers if you will. How do you build a stable political system to serve, say, 100 million people on something like that? You don't.

The adaptation is various forms of anti-competitive policies, outright corruption, bailouts, industry subsidies, militarism, dictatorship, police state, etc. Those things keep the system stable enough to last longer than the next boom/bust cycle.

Plainly-spoken, it's why Marx's predictions were wrong and why communism-proper has never been successful. Instead, we have variations of cabal/corporatist/monarchist-capitalist political economies which are different only in their historical details.
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Chris Rhodes (profile), 10 Jul 2012 @ 5:41am

*gasp*
most cities have very strict regulations on cabs -- which they always position as being for the protection of customers, but in reality are always about limiting the market and keeping competition out.
It's almost like the government is using regulation to create the very monopolies that people claim we need the government to protect us from!

Someone should tell the libertarians!
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silverscarcat (profile), 10 Jul 2012 @ 5:42am

Oh, it's simple...
No one on the East coast drives cars.

Remember when Conan O'Brien moved from New York out to California? The first thing he said was "everyone here has cars, I'm shocked! No one in New York drives!"
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Michael, 10 Jul 2012 @ 6:06am

I recall CBS tracking down "illegal" cab services at airports with one of their 'Shame on You' segments. Pretty sickening.

The record labels and movie studios work to disrupt the internet for the very same reason -- they want to monopolize it and disrupt all potential competition.
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Hephaestus (profile), 10 Jul 2012 @ 6:06am

This is the main problem in US. Industries using the law to drive others out of business and prevent competition. Cable prices, pharma prices, copyright industry, patent wars, are all due to the same thing.

Mike M's battle against the abuses of the copyright industry are the wrong war to be fighting. We should be trying to stop this sort of behavior by the governments of the US, local, state, and federal.
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Anonymous Coward, 10 Jul 2012 @ 6:17am

Re:
yea your revolutions have worked so well in Russia, and Africa the people are hanging those that brought the revolution...

Those who don't know history (or choose to ignore it) are doomed to repeat it...
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Anonymous Coward, 10 Jul 2012 @ 6:38am

Re: because its the Law
And government ran health care will be better why?
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E. Zachary Knight (profile), 10 Jul 2012 @ 6:44am

Re: *gasp*
Libertarians are well aware of the situation and are working hard to rectify it:

http://www.ij.org/nashville-limos
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Andrew D. Todd, 10 Jul 2012 @ 6:59am

The Future of Cabs.
Well, as I understand it, big fleet cab operators in places like New York, where medallion command high prices, are happily adopting the underlying technology of Uber, only to their own purposes. They are putting an ATM terminal with moving map display in the back seat of every cab, connected up to headquarters. The trend is for the customer to swipe his credit card, and point out on the map where he wants to go, and the driver will now be a closely supervised minimum-wage employee who doesn't handle money, and drives where the computer tells him to. You know, like the workers at McDonald's. The traditional cab driver is going the way of the waitress in a traditional "diner" restaurant, the kind of place in the Norman Rockwell paintings where you sat on a stool at the counter, facing into the little kitchen. The implication of cellphones, GPS's, etc. is that, just because the driver is out on the street, that doesn't mean he can't be closely supervised and timed with a stopwatch, just like an assembly-line worker.

In Washington, D.C., the political rationale of medallions is that a taxicab owner/driver who wants to retire can sell his cab and medallion to a big company.
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Anonymous Coward, 10 Jul 2012 @ 7:23am

Circumvention
Create a new company. Call it "taxicabs, Inc." Provide minimal taxi service to a single tiny town at 1/5 the cost you want, with time and distance rates incrementally less than the rates you want.
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art guerrilla (profile), 10 Jul 2012 @ 7:41am

Re: because democracy fails in DC
somewhat true-ish, but the root of the problem is THEY HAVE NO VOICE...
there is NO 'self-rule' in DC: the 'heart and soul' of small-dee democracy, the literal and figurative capitol, and the residents have ZERO say in how their own city is ruled...

if/when any mayor/etc tries to make ANY significant changes, they are slapped down by kongresskritters who exert near total CONTROL over DC...

it is NOT a 'normal' city in a lot of ways, and the total lack of any self-rule is the most egregious...
(of course, that is they way the kongresskritters like it, so that is the way it will stay...)
art guerrilla
aka ann archy
eof
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Jesse (profile), 10 Jul 2012 @ 7:52am

(c) (1) The minimum fare for sedan-class vehicles shall be five times the drop rate for taxicabs, as established by 31 DCMR � 801.3 (a).

(2) The time and distance rates for sedan-class vehicles shall be greater than the time and distance rates for taxicabs, as established by as established by 31 DCMR � 801.3 (b) and (c).

Easy solution: flood the market with complimentary coupons or gift cards which ensures that although everyone is paying that rate, their not actually paying that rate.
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Jesse (profile), 10 Jul 2012 @ 7:52am

Re: Circumvention
Or just have 1 taxi cab in the same city as you providing service at that 1/5 price.
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Jason, 10 Jul 2012 @ 8:07am

Gee, I wonder...
I wonder if it has anything to do with the automotive industry putting money in politician's pockets? More cabs means less people buying vehicles.
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Anonymous Coward, 10 Jul 2012 @ 8:49am

tell me something that happens in the US that the legacy industries dont try to make illegal, shut down or way more expensive that needed. anything just to stop competition! it's a typical situation caused by on the one hand innovators and on the other those who are shit scared of having to compete to keep their business afloat. i am actually amazed that the human race has managed to progress as far as it has, given the number of barriers that are erected by the selfish arse holes we have everywhere. if the service offered was that good, why stop someone else from offering an alternative? it will fail by itself if it's not so good, wont it.
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Anonymous Coward, 10 Jul 2012 @ 9:30am

"which they always position as being for the protection of customers, but in reality are always about limiting the market and keeping competition out."

That statement alone shows that you are rather clueless on the whole situation.

The ideals are to protect the citizens, even if the methods used appear a bit weird to you. One of the ways they protect the citizens is to limit the number of cars which can be taxis. Your immediate reaction is that it is a move to "block competition". It's not really a true statement, since the rates a taxi charges are pre-set, there isn't any price point competition that would benefit the public. 1 taxi or 1 million taxis, the rates are set and would be the same.

You may say "if there are more taxis, people wouldn't have to wait for one". While this is true, it would also lead to less occupied "paid" time for each drive. That in turn would lead to a push for higher rates (because they are making less paid miles per hour), leading the public to pay more.

So why not abolish the taxi boards that set rates, and allow for a free market? Well, that would be nice, but generally the free market doesn't work in these areas. Rates would vary greatly, making it even easier to stiff tourists and little old ladies. Moreover, a race to the bottom on might lead drivers to skimp on car maintenance, you know, those brakes can hold on one more week, and that CO2 leak into the car isn't that important to handle.

Longer term, it would likely drive people out of the taxi business, making the cars more scarce, more expensive, and likely only available at peak times, when the drivers can make money. Good luck getting that late night taxi home from the bar, the drivers don't want to work that shift, and the companies don't want to risk the cars.

Are there companies or groups that use the rules to their advantage to create monopolies or to profit from the situations? Yup, there sure are. There are crooked people in almost every business. However, the alternatives to the current situation isn't an open and free market, that would only serve those who could afford, and only at the best times. Is that what you really want?
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Anonymous Coward, 10 Jul 2012 @ 9:52am

Re:
Free-market, classic capitalism has never existed anywhere.
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Anonymous Coward, 10 Jul 2012 @ 10:12am

Re: Circumvention
One problem, taxicab rates are set by the government.
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Anonymous Coward, 10 Jul 2012 @ 10:38am

Re:
*Does the mario in frount of the white house*
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Anonymous Coward, 10 Jul 2012 @ 11:05am

Re: Oh, it's simple...
I wish people would say New York City when they mean New York City; I hate it when the entire state is lumped in with that shithole. Most residents of the STATE of new york drive cars. The 9 million packed into the sardine can of the CITY do not.

When my girlfriend moved here from Kansas, literally every single one of her friends thought New York City was the state itself. They couldn't understand how she could be 6 hours away from it and still be in "New York."
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Anonymous Coward, 10 Jul 2012 @ 11:16am

Re:
CO2 leak? Carbon dioxide isn't the killer (we exhale it), its CO (carbon monoxide).
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Anonymous Coward, 10 Jul 2012 @ 11:21am

Re: Re:
Yes, because in a small scale society it's just surplus to requirements, and it's as realistic and achievable for a large scale society as communism. It's just never going to happen outside of ideological fantasizing.
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Anonymous Coward, 10 Jul 2012 @ 11:45am

Re: Re: Circumvention
How absurd!
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Anonymous Coward, 10 Jul 2012 @ 11:56am

Re:
No one tells the taxis where I live how much they may charge.

There are plenty of taxis and plenty of different taxi service offerings, from luxery and corporate through to budget services.

Like every other vehicle on the road, taxis are obliged to be of roadworthy standards, must pass regular inspections and are subject to fines and being summarily ordered off the road if found to be below warrant of fitness standards.

If there were problems with unfit taxis being involved in accidents the more established "legacy" companies that were around before deregulation would be making plenty of fuss about it. They certainly claimed the same kind of things you did back in the early 80s when the market was deregulated.

The free market does not work for anything and everything. Taxis and taxi operators ought to be licensed, but the licenses should to be inexpensive and primarily about ensuring minimal standards to do with safety and consumer rights.

There's no need for anything more onerous or interfering than that in the taxi market so far as I can see. It is one of the many areas where aside from a few ground rules, most of which are just good sense, the free market can be mostly left to do its thing.
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Chris Rhodes (profile), 10 Jul 2012 @ 12:51pm

Re: Re: *gasp*
I'm a libertarian; I was just having a laugh at people who have no idea why libertarians are against government involvement in business.
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Anonymous Coward, 10 Jul 2012 @ 1:49pm

"We don't tell Apple that it must charge more for computers so that they're seen as "premium" devices."

We don't have to they do it already.

Zing!
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Anonymous Coward, 10 Jul 2012 @ 1:58pm

Re: Re: Re: *gasp*
Libertarians ideals scare me because I think about companies like BP, Monsanto, Coke and all the villainous things they do with a government regulating them (poorly sure) and worry about what they would do without even the poor oversight they receive.
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Anonymous Coward, 10 Jul 2012 @ 2:43pm

Not surprised....
"Why would the people of DC accept this kind of thing?"

Didn't they elect a coke adict as mayor, twice?
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E. Zachary Knight (profile), 10 Jul 2012 @ 2:54pm

Re: Re: Re: Re: *gasp*
BP, Monsanto

Both of those companies have government backing to do what they do. They are provided government grants, tax money and protection. They are not operating in anything close to free market.

Coke

Not exactly sure what evil things they are doing. You are the first I have ever read complaining about their "villainous things"
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Cody Jackson (profile), 10 Jul 2012 @ 4:19pm

Use different cars?
"(c) (1) The minimum fare for sedan-class vehicles shall be five times the drop rate for taxicabs, as established by 31 DCMR � 801.3 (a).

(2) The time and distance rates for sedan-class vehicles shall be greater than the time and distance rates for taxicabs, as established by as established by 31 DCMR � 801.3 (b) and (c)."

If the above is true, then couldn't Uber get around the requirements by not using sedans? What about using compacts, full-size, vans, monster trucks?
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Chris Rhodes (profile), 10 Jul 2012 @ 5:15pm

Re: Re: Re: Re: *gasp*
You mean like how Monsanto sows their genetically modified seeds on farmers' property, then sues them in a government court for violating their government-granted gene patents in order to force them to use and pay for Monsanto's terminating seeds? Have I mentioned how the government is perfectly happy about this, and how they have a revolving door between Monsanto and government agencies like the FDA?

Yeah, that shit's on the tab of people like you, who think that if you can just give the government enough power, eventually they'll start using it in your favor instead of in favor of the corporations.

"Just one more regulation!"
"Maybe this time it'll be different!"
"If we just got the right people in charge!"

You'll never learn. Lambs to the slaughter.
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Cynyr (profile), 12 Jul 2012 @ 5:01pm

Could someone explain to me what Uber is and what it has to do with taxi cabs? I would have thought a 2 line description for those of us not familiar would be good.

I has some meaning to me as a word in German, but other than that none at all...

Anyways a bit on google later shows that is like a modern version of a taxi cab. and that the city nearest me to have them is 8 hours away (chigago), and that it goes up to 2 days quickly from there.
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Airport Limo Service, 19 Jul 2012 @ 7:26pm

Airport Limo Service
You are Wright I agree with you Josef .really the cabs and taxi business are involving in corruption because of local policies but political parties are involved somehow in this mater. Funny thing about this that these are the people who say they are concerned about our economy and welfare. But if cabs and taxis get banned many people get unemployed and traveling became very expensive. They need to make some policies to prevent unemployment. Free-market, classic capitalism has never existed anywhere. The only way is to put these services under some rules and policies. Most of the DC population is lower class. The problem is exacerbated by the fact that DC is a very transient city. A lot of the educated people living here either weren't around during the last local election cycle, won't be around for the next, or never even register to vote in the city
~Aansy stone
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Airport Limo Service, 19 Jul 2012 @ 7:26pm

Airport Limo Service
You are Wright I agree with you Josef .really the cabs and taxi business are involving in corruption because of local policies but political parties are involved somehow in this mater. Funny thing about this that these are the people who say they are concerned about our economy and welfare. But if cabs and taxis get banned many people get unemployed and traveling became very expensive. They need to make some policies to prevent unemployment. Free-market, classic capitalism has never existed anywhere. The only way is to put these services under some rules and policies. Most of the DC population is lower class. The problem is exacerbated by the fact that DC is a very transient city. A lot of the educated people living here either weren't around during the last local election cycle, won't be around for the next, or never even register to vote in the city
~Aansy stone
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terry, 5 Feb 2013 @ 12:44am

good !
They need to make some policies to prevent unemployment. Free-market, classic capitalism has never existed anywhere. The only way is to put these services under some rules and policies. Most of the DC population is lower class. The problem is exacerbated by the fact that DC is a very transient city. A lot of the educated people living here either weren't around during the last local election cycle, won't be around for the next, or never even register to vote in the city http://vienne.co/bop-nu
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