Lyft Announces NYC Launch, Taxi Commission Declares It Illegal Hours Later

from the don't-mess-with-our-taxi-medallions dept

Thu, Jul 10th 2014 3:31pm — Mike Masnick

While Uber gets much of the attention in the ride-sharing space, many people I know in San Francisco swear by Lyft instead. Lyft has the reputation of being the more laid back, friendlier version of Uber. Rather than Uber's infamous "surge pricing," Lyft has happy hour discounts. Rather than the sleek corporate feel of Uber, Lyft is famous for drivers putting giant pink mustaches on their cars, encouraging passengers to sit up front... and to give drivers a good old fashioned fist bump. While Uber has been available in New York City for some time, Lyft took its time, finally announcing plans to open up in NYC on Friday (well, Brooklyn and Queens, initially, staying away from taxi central Manhattan).

Not surprisingly, the NYC Taxi and Limousine Commission was not pleased with this. While Lyft says it's tried to work with the TLC, the TLC disagrees, noting that Lyft agreed to a single meeting that just happened this week.

So, of course, it's not surprising that, within a day, the TLC officially declared Lyft an "unauthorized service" in NYC, meaning that it may start cracking down -- something NYC did last year to the other top competitor in the space, Sidecar. Lyft says it's still planning to launch, insisting that it doesn't believe the rules the TLC are citing apply to it. Basically "come at us, TLC!"

The TLC insists that it wants Lyft to be able to operate in New York City, even saying that it's willing to change some of its rules, but bureaucracies -- especially those with close ties to highly regulated industries that have a history of keeping out competition -- don't tend to move very fast. As we've noted before, cities that quickly ban these kinds of services are basically advertising themselves as places not friendly to innovation and/or run by corrupt officials.

For all the arguments about how these services don't meet the "stringent" requirements for existing taxi regulations, almost everyone I know prefers using services like Lyft and Uber over traditional cab services. They're much more convenient and personally I've found the service to be significantly better overall. Part of the problem is that the regulations were built for a different time, when there was significant information asymmetry between a rider and a driver, allowing drivers to take advantage of riders. But, these kinds of services actually flip that equation: they provide much greater information to the rider, and even give them a big say in passing on similar information to others, in the form of ratings. Thus, there are natural incentives to provide a better overall service, making many of the purposes of existing regulations stale and obsolete.

But, of course, as often happens in highly regulated industries, those who already made it through the hurdles like those regulations because they limit competition, and allow prices to be higher due to scarcity. It also gives them less incentive to provide better services. Thus, you get into a world of regulatory capture, where things are worse for everyone. While, yes, the "intentions" of these regulations may be good, the reality is that the information exchange enabled by technology makes many of the regulations obsolete. A slow-moving bureaucracy (especially one dealing with regulatory capture) isn't going to move very fast, but that's harmful for overall innovation in the space and setting up the best conditions for citizens of NYC, who probably prefer a better overall experience in getting around.

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Filed Under: new york, nyc, ride sharing, tlc
Companies: lyft, uber

30 Comments

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Jake, 10 Jul 2014 @ 4:00pm

At the risk of sounding anti-innovation, those 'stringent' rules are often in place because Extremely Bad Things happen without them. Are Uber and Lyft doing criminal background checks on their drivers, and requiring proof they're insured to carry paying customers and their vehicle is roadworthy?
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- Anonymous Coward, 10 Jul 2014 @ 4:06pm
  
  Re:
  At the risk of sounding like a jerk: http://lmgtfy.com/?q=lyft+background+check.
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- Mike Masnick (profile), 10 Jul 2014 @ 4:18pm
  
  Re:
  Are Uber and Lyft doing criminal background checks on their drivers, and requiring proof they're insured to carry paying customers and their vehicle is roadworthy?
  
  Yes.
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  - kryptonianjorel (profile), 11 Jul 2014 @ 12:05am
    
    Re: Re:
    Lyft has a very good hiring process. For a driver to be approved, he or she must meet with a current, senior driver called a mentor. This mentor takes an hour or so explaining the way Lyft works, and taking a test ride with the driver. If he or she can't drive, communicate, navigate, or any number of other things, he or she isn't approved. When a driver is ready for this mentoring, the app processes their DMV record. Afterwards, if they are approved, Lyft performs a criminal background check. These checks are done quarterly, so we always know we have safe, reliable drivers on the road
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- Mike Masnick (profile), 10 Jul 2014 @ 4:21pm
  
  Re:
  At the risk of sounding anti-innovation, those 'stringent' rules are often in place because Extremely Bad Things happen without them. Are Uber and Lyft doing criminal background checks on their drivers, and requiring proof they're insured to carry paying customers and their vehicle is roadworthy?
  
  And, actually, more to the point, most of those "Extremely Bad Things" happen only when there's information asymmetry -- when companies can get away with it. Both Lyft and Uber have been pretty upfront about the background checks/safety precautions and how they quickly kick out bad drivers. The regulations were put in place because there weren't independent incentives to keep those offerings safe -- but with those guys there are.
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- knightsbore (profile), 10 Jul 2014 @ 4:22pm
  
  Re:
  $1,000,000 Full insurance, Full background check, and an in person 19 Point Inspection and requirement of a 2002 car or newer.
  
  That's just for Lyft, Uber has even more stringent requirements and they both meet or usually exceed any regulated requirements.
  
  https://www.lyft.com/safety
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  - Anonymous Coward, 10 Jul 2014 @ 4:56pm
    
    Re: Re:
    2002 car or newer? Wtf. There's limo services that require 4 year or newer cars and nothing less. A 2002 car driven as a limo can have over 500,000 miles on it easily.
    
    Srsly, wtf. Won't drive with a company that uses such old cars. Ridiculous.
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    - Anonymous Coward, 10 Jul 2014 @ 5:08pm
      
      Re: Re: Re:
      2002+? It says 2000+ ...
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    - orbitalinsertion (profile), 10 Jul 2014 @ 7:41pm
      
      Re: Re: Re:
      Age isn't necessarily relevant to roadworthiness. It's how the vehicle is kept.
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      - Anonymous Coward, 10 Jul 2014 @ 8:59pm
        
        Re: Re: Re: Re:
        Obviously. Nonetheless, when one orders a car one doesn't want a 50/50 chance of getting a trash lyft nor anything that's short of 99% reliability.
        
        Also, it's clear from the website that what lyft is advertising isn't a "limo service" nor a "taxi service". Based on the "stories" it's more about community / drivers helping those in need.
        
        They aren't a "taxi / car service" similarly to Uber. They're merely a PR firm that tries to be another middle man in the car industry it feels.
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        That One Guy (profile), 10 Jul 2014 @ 9:21pm
        
        Re: Re: Re: Re: Re:
        I'd imagine the 'in person 19 Point Inspection' mentioned would take the guesswork out regarding whether or not the car is in good shape.
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        kryptonianjorel (profile), 11 Jul 2014 @ 12:01am
        
        Re: Re: Re: Re: Re: Re:
        The nice thing is, if you take a Lyft and the car seems janky, you can report that to the support team, and they'll suspend the driver until he or she repairs their car. Tell me any taxi company would do that!
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    - John Fenderson (profile), 11 Jul 2014 @ 8:09am
      
      Re: Re: Re:
      "Won't drive with a company that uses such old cars."
      
      Whereas I, personally, couldn't care less. What's important is how well the car is maintained, not how old it is. I know people with antique cars that are more reliable than new cars.
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  - kryptonianjorel (profile), 11 Jul 2014 @ 12:00am
    
    Re: Re:
    Hate to burst your bubble, but Uber certainly doesn't have a more stringent set of requirements. They don't even have my updated insurance, and it doesn't seem to bother them. But you'll be damn sure Lyft would deactivate me the day my insurance expires
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- Anonymous Coward, 10 Jul 2014 @ 4:54pm
  
  Re:
  The problem isn't the existence of consumer protection and safety regulations. If it's just a matter that competitors have to follow those same regulations then I don't see that as much of a problem. The problem is that the law forbids competition and requires medallions to operate and the number of medallions are artificially and arbitrarily kept limited. The number of taxicab drivers is artificially kept below a certain number period. This has nothing to do with safety and consumer protection or the fact that incumbents need to pass some test (a test that everyone else can also pass and receive a license for passing). There aren't a set of standards and tests that anyone can meet/pass and receive a license since the number of available licenses is artificially limited.
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- orbitalinsertion (profile), 10 Jul 2014 @ 7:50pm
  
  Re:
  A lot of those regulations are in place because certain types of transportation companies would behave improperly in an organized fashion without them. Not just by being lax, but by actively seeking to behave unethically.
  
  Non-monolithic networks require different regulations. And maybe some of those current regulations on taxi/limo services should be changed if it benefits everyone. But what you have here is a regulatory body acting as a monopoly/oligopoly-enforcement organization. The regulated frequently co-opt the regulation to their own ends, even if they have to bow to some regulation as well (or not, as the case may be).
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- Anonymous Coward, 11 Jul 2014 @ 11:28pm
  
  Re:
  At the risk of sounding anti-taxi/limo driver...have you ever done research on just how many people were raped/sodomized or murdered by licensed taxi drivers?
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Anonymous Coward, 10 Jul 2014 @ 4:13pm

another old musty industry gets it's jimmies rustled.

I declare the old musty cab services to be inferior and therefore irrelevant. The people will decide what they use not some corrupt organization. We will let you know if your needed TLC until then get bent.
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Hal Rottenberg (profile), 10 Jul 2014 @ 4:27pm

Mike, remind me why you hate libertarians again?
You sure talk the talk of a libertarian economist! Totally agree with the stance you're taking.
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- andypandy, 10 Jul 2014 @ 5:36pm
  
  Re: Mike, remind me why you hate libertarians again?
  He is supporting a good service that has innovated and improved the service to customers, nothing more I believe.
  Not everyone makes their views thinking about if it is something a political party would support.
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charliebrown (profile), 10 Jul 2014 @ 4:47pm

Taxi Services
It strikes me that taxi owners are upset because they think Lyft and Uber, etc, are competing taxi services. They are not taxi services. They are carpooling services. Now there are a lot of similarities, obviously, but one is a taxi service and the other is not. For example, if you need a taxi now, you can get a taxi sent to you now. You can't do that with Uber or Lyft, etc. Their service can only be pre-arranged, often days in advance, not minutes in advance. They are different things.
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- kryptonianjorel (profile), 10 Jul 2014 @ 5:37pm
  
  Re: Taxi Services
  Lyft and Uber are not carpool services at all. All the rides provided through these companies are on demand. You cannot pre-arrange a ride. You click the button, a car comes immediately.
  
  They're certainly different, but not in that manner
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Anonymous Coward, 10 Jul 2014 @ 4:49pm

Medicaid Cabs
Search - lawsuit + yellow + cab + insurance + medicaid

This shows that there are problems with cabs being insured.

One of the search results is titled the following:
"Taxpayer-funded cab rides draw 100s of complaints"

Some of the transportation companies used for medicaid runs are limos. Why are taxpayers paying for limos to take people to the doctor?
...
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Christenson, 10 Jul 2014 @ 4:59pm

Fix an information assymmetry for us
Hey Mike:
Just a friendly thought: What are some of those ridiculous, but now obsoleter TLC regulations???

Oh, and to anyone thinking of being a libertarian: The absence of government works as long as everyone is equal. Throw a Microsoft into the mix, and you get a nice dystopia with an effective, unelected government...which is why some rich people support it. And yes, quis quotidies ipsos quotidies? I don't know, but I think required sharing of information might be the right answer. That wasn't available when the aphorism was first written down!
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- ChrisB (profile), 10 Jul 2014 @ 7:31pm
  
  Re: Fix an information assymmetry for us
  We will always need some form of collective. Just not a highly regulated centralized government. Most people read consumer reports before they buy a car. If the government was gone, other groups would independently do safety testing.
  
  Look, Ebay functions perfectly fine without government. In fact, large companies are weaker without government. They can't bend regulators to stop startups. And consumers voting with their wallets is in fact much more democratic than political elections, where you change the head on a huge machine.
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  - John Fenderson (profile), 11 Jul 2014 @ 8:11am
    
    Re: Re: Fix an information assymmetry for us
    "We will always need some form of collective"
    
    Which is a government.
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- Anonymous Coward, 22 Jul 2014 @ 7:23am
  
  Re: Fix an information assymmetry for us
  You are confusing Libertarians with anarchists. Libertarians don't want an "absence of government", they want a limited one.
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Christenson, 10 Jul 2014 @ 5:11pm

An old idea, but still worth thinking about
When cameraphones became common, I noted that the security situation with hitchiking changed dramatically...both the driver and the passenger could send pictures of each other to each other's accounts, pretty much guaranteeing that if anything bad happened, the cops would have a nices photo of the perp and any license plates involved.

But we still seem to need that official imprimatur to relax off the paranoia -- we won't leave it to amateurs!
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Ed (profile), 11 Jul 2014 @ 6:39am

As a user of these services (I don't own a car), I welcome Lyft and Uber to the scene. I've given incumbent taxi services a fair chance, I've even tried the new app Hailo (which uses incumbent taxis). But, the taxis continue to overcharge, are late or never show up, and some are downright hostile. UberX tends to be a bit pricier but is extremely reliable (you know you're going to get a much newer car and very professional service) and Lyft has lower prices and a more "friend giving you a lift home" attitude. Uber Black is the towncar/limo service and has proven to be exceptional, and priced very competitively. I will never go back to using taxis again. They had their chance to compete fairly for my money but they blew it.
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Mike Shore (profile), 11 Jul 2014 @ 11:14am

Ultimate hypocrisy
The previous TechDirt article (https://www.techdirt.com/articles/20100517/1307209446) specifically mentions a "shadow" transit system in NYC that is largely unregulated. How is it that Lyft, Uber and other legitimate companies are shut out while the Transit Commission allows a grey market to thrive?
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