Ridesharing startups hit with cease-and-desist by California regulator

http://arstechnica.com/tech-policy/2012/10/ridesharing-startups-hit-with-cease-and-desist-by-california-regulator/

by jetcom • 14 years ago

42 26 14 years ago

muzz• 14 years ago

Would this apply to Zimride, Riderbee, Ridejoy, etc. ?

anigbrowl• 14 years ago

Tough to say. For Ridejoy in particular, regulation could be a challenge, because it will be argued that by matching drivers with underused vehicles, there's an implicit promise that the vehicles are roadworthy and so on. Sure, you can invite users of the service to waive some of their rights or voluntarily accept a degree of risk and uncertainty to use the service, but courts sometimes view such arrangements as contracts of adhesion - tilted in favor of the offeror by virtue of the fact that a large organization has substantially more bargaining power than an individual, who is left with little choice but to accept or reject terms rather than negotiate them.

I don't have a strong opinion on how this should turn out and am not an attorney. Rules that limit industry like this are sometimes the result of regulatory capture, but are equally often the result of consumer pressure following malfeasance by unscrupulous service providers some time in the past. Certainly such rules represent an increase in red tape, but that doesn't mean they're inherently bad; one might argue that they're an unavoidable corollary of a complex technological society, reflective of the challenges faced by its members - just as product liability rules are reflective of industrialization's severance of the traditional relationship consumer and producer that used to exist at the local level (blacksmiths, carpenters, et al.).

Incidentally, I hope people won't interpret the CPUC's representatives mention of enforcement mechanisms as a threat. Spokespersons for public bodies like this are duty-bound to cite the way the law actually operates, rather than make policy statements about how it should operate. So discussion of enforcement mechanisms is no more than a restatement of fact in response to journalistic inquiry.

johnrob3• 14 years ago

Possibly Riderbee, since IIRC they are similar to sidecar and lyft. Zimride and Ridejoy operate like a traditional bulletin board so they should be fine.

When you're dispatching drivers in real time, just like a taxi dispatcher, the law can interpret you as one. The passenger is entrusting the service to assure the driver is safe. That's not a responsibility that the government wants to bestow upon a non-registered entity.

ridejoy2• 14 years ago

We let drivers offer rides to places they're already heading to, and we cap pricing at the IRS reimbursement rate of about 50c/mile. This is very different from services like Sidecar and Lyft that compete with taxis, which in SF are around $3/mile and hire drivers to pick up passengers.

We didn't receive a C&D from CA, and I doubt we will :)

rootedbox• 14 years ago

I can agree with side.cr, and lyft.. That they are simply a platform by which drivers, and those wanting to be driven are able to reach other. However... Even though payment is voluntary the drivers are participating in a transportation service, and are subject to being regulated as one; non-profit or not.

Not a perfect example of this but similar is that craigslist might be a communication tool for those dealing in prostitution, but they are not the ones committing the crime.

johnrob3• 14 years ago

The problem is that "communication platforms" don't normally run background checks, process payments, or offer insurance policies. Ironically, getting rid of these things - which serve to make the service safer - probably would make them more legally sound.

nc17• 14 years ago

If I were the rental car lobby, I would be putting pressure on regulators to make things as hard as possible for these companies. They are startups, so it's hard for them to put up much of a fight.

It would be very different if Google was behind ride sharing. It took someone the size of Apple to work with the music industry to sell mainstream music legally to the masses.

aaronblohowiak• 14 years ago

>It took someone the size of Apple to work with the music industry to sell mainstream music legally to the masses.

This is historically inaccurate; Apple was merely the first to do so at such scale. UMG/Sony/WMG all had the 99cents/10dollar albums by 2000, the iTMS wasn't available until 2003.

http://en.wikipedia.org/wiki/Online_music_store#History http://en.wikipedia.org/wiki/ITunes_version_history

jakejake• 14 years ago

I think the idea of ride sharing is pretty cool. But to be fair when I read about some of the ride services, they kinda are just unregulated taxi services.

If somebody's heading to the airport and I get to hitch a ride with them - that's a ride share. Having drivers waiting for ride requests and then taking them wherever they want to go - call me crazy but that doesn't seem like ride sharing to me.

TinyBig• 14 years ago

I wonder if some of these startups knowingly run afoul of the law, thinking that if they build sufficient ridership it will give them the sway to have the laws changed.

rprasad2• 14 years ago

I know people in the echo chamber don't like to hear this, but ridesharing is not an innovation. Los Angeles and Chicago have had ridesharing programs for at least a decade. Hell, even Cleveland had a ridesharing program years before Uber or Lyft were founded (and that was how I got around Cleveland in law school).

Uber and Lyft call themselves "ridesharing" programs where passengers "donate" money to a driver who "just happens" to be going to the same destination as his passengers but who will not remain at that destination and who will probably pick up more passengers shortly thereafter and "coincidentally" drive them to their desired location in exchange for a "donation." Uber and Lyft can use all the euphemisms they want, but they what they are is the very definition of a for-hire car service.

The fact that they straddle the line between two types of regulated car services (cabs and limos/"charter car") does not change the essence of the commercial transaction that takes place. The fact that a mobile app or website is used to arrange the transaction instead of a phone call does not change the essence of the commercial transaction that takes place.

Regulations on cars-for-hire exist for a reason: to protect the safety of passengers by ensuring a minimal level of competence and to ensure recompense via adequate capital or insurance in the event of an accident. These regulations work remarkably well, which is why so many people think they are unnecessary.

te_platt• 14 years ago

The regulation to ensure a minimal level of competence is a driver's license and the regulation to ensure recompense is (as you mention) insurance. Both of which are required of every driver whether a taxi or not. The regulations on taxis exist to protect taxi owners.

And yes it is clear that Uber and Lyft are taxi services.

johnrob3• 14 years ago

Uber is in an entirely different legal category. All of their drivers are registered. Their main issue is essentially a turf war between limos and taxis.

Lyft and sidecar are being accused of enabling unregistered professional transportation.

Game_Ender• 14 years ago

Did you read the article? Uber is definitely not being served hear, and they don't call themselves a ride sharing services.

Besides that, I agree with your point about these services really being car's for hire, but calling themselves ride sharing services.

potatolicious• 14 years ago

Check your impressions about Uber - they have never pretended to be a ridesharing service. Uber fares are metered and non-negotiable. The controversy with Uber is that it straddles livery car service and traditional taxis, and that makes its legal position fuzzy.

Uber is distinctly different from what the article talks about here: Sidecar for example does project itself as a "ridesharing" service, where fares are determined by the rider (with not-very-subtle "suggestions" by the service) and optional (though of course, not really).

I'm a fan of upsetting the corrupt and outdated taxicab industry, but at the same time I have few sympathies for Sidecar and the like when governments rightly call them out on their bullshit: they are not ridesharing services, no matter how dumb they play.

ripley1• 14 years ago

You're missing the key regulation these services are trying to do an end-run around: an artificial cap on the number of taxi licenses allowed in these cities. Nothing to do with safety, just an officially-sanctioned cartel.

Compliance with all existing regulations would in many jurisdictions require the purchase of existing taxi drivers' medallions (or the equivalent) at exorbitant rates - and not one extra cab would be allowed on the street after that transfer is complete.

You're making it sound like regulatory compliance for Uber and Lyft is as simple as ensuring that their drivers are competent and providing some means of recompense for wronged customers. That simply isn't true.

rprasad2• 14 years ago

I don't think that regulatory compliance is as simple as ensuring that drivers are competent and providing some means of recompense. That is merely the purpose of enforcement, not the mechanism. The mechanism is a great deal more complex, and involves multiple inspections: vehicle inspections, garage inspections, drive interviews, random audits, a good deal of compliance-related paperwork, etc.

It is an artifical cap that is deliberately intended to inflate prices above marginal costs, to ensure that market participants achieve sufficent revenue that they can actually afford the requirements (i.e., insurance, maintenance, etc.). Without that cap, taxi cab and charter car rates would drop to unprofitable levels as the influx of drivers would push rates to the floor. Cab and charter car service providers would skimp on costs, most likely maintenance and insurance, which would place passengers at risk. However, it is more likely that most cabs/charter cars would be independent cars.

It is also in place to minimize the level of market participants to maintain the feasibility of enforcement. It's possible to effectively enforce these regulations with a dozen or so companies with a handful of regulators. With hundreds of independent market participants, the sheer amount of work to conduct normal inspections or other enforcement activities would overwhelm the enforcement agency, requiring either substantial fee increases, tax increases, or roulette enforcement.

ridejoy2• 14 years ago

Some relevant facts:

1) Ridesharing has been around for decades. There were high-tech phone-based ridesharing programs in the 90s. I don't think anyone claims the idea of sharing rides itself is new.

2) There are many ridesharing services including us (http://www.ridejoy.com), Zimride, and Carpooling.com, where drivers give passengers a ride to someplace the driver is already going.

Lyft (a new offshoot of Zimride) and Sidecar have appropriated/redefined "rideshare" because it sounds friendlier and less commercial than "car service". Uber doesn't use the word rideshare.

3) Having used both Lyft and Sidecar extensively, the fact that it's a commercial transaction doesn't change the fact that the experience with either one is generally as good as, sometimes much better than, actual taxicabs in SF. It's also a bit cheaper and you're more likely to actually get one. Hopefully the state just requires adequate protections instead of killing these very useful services.

ericdykstra2• 14 years ago

Regulations on cars-for-hire exist for a reason: to protect the safety of passengers by ensuring a minimal level of competence and to ensure recompense via adequate capital or insurance in the event of an accident.

A minimal level of competence? Safety of passengers? I've taken more than a few rides on all of SF taxis, Uber black cars, Uber X, and Lyft. SF taxis had the most hasty drivers, and a couple I really didn't feel comfortable riding with at all. With Uber/X and Lyft, I've never felt anything but safe, and I have never been harassed for using a credit card to pay.

These regulations work remarkably well, which is why so many people think they are unnecessary.

If everything works so well, why are so many people using Lyft? Have you ever called a taxi and not had it show up because it found another fare on the way to pick you up?

I'm sorry, but taxi service is broken in SF (the only place I've used it extensively). I prefer to make my own decision on what is safe and what isn't. I don't need a government that takes money from vested interests to tell me what's safe.

joe_the_user2• 14 years ago

I drove a taxi a while back (not in SF) and I have to agree that a lot of taxis are extremely dubious in their level of safety. I only figured out after a spin-out that the company car I'd been assign had bald tires with uneven tire-pressure. And well, obviously I was inexperienced too or I might spotted that earlier but that's not uncommon.

But that is after all the regulations. With no regulation at all, things wind-up even diciers. Will you check the tire pressure of every car you get in?

The reason taxis are unsafe is because drivers and companies don't make much and try to extract every last dime from their rides and their cars and so-forth.

With more competition, less money to per drive and so-forth, I couldn't imagine how dodgy things will get.

I'd like to think I was pleasant and courteous. I doubt you can judge driver's skill by looking at his or her face so your eagerness to judge for yourself seems foolish.

I can believe Uber-now or Lyft-now looks good. Will you know when the safety goes out the window, considering there is constant pressure for that to happen?

dsl• 14 years ago

Prostitutes attempt to skirt the law in the same way by accepting "donations" for time instead of payment for services. You know how well that works for them.

citricsquid• 14 years ago

I thought prostitution laws were avoided by escorting, providing time with another adult (which totally won't have sex involved!) for a fee? or is that to avoid different laws?

tsotha2• 14 years ago

Heh heh. If they're donations then it's just like church - you don't have to pay if you don't want to.

On the other hand the usher doesn't beat the crap out of you if you don't.

tsotha2• 14 years ago

I agree with the state in that these companies fall under the law as written. The real question is whether the law is really designed to benefit the public or whether it's a rent-seeking arrangement with the taxi companies.

Ridesharing startups hit with cease-and-desist by California regulator

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