Rideshare companies Uber and Lyft ceased operation in Austin, Texas, on May 9 after voters supported a rule requiring the companies to fingerprint their drivers. The move set off a nationwide debate about the role that patchwork regulation plays in interfering with the ability of the companies to operate.
Laws have been imposed on ridesharing services by both states and municipalities, and they touch on a range of issues. Some of those include labor issues, like the right of drivers to unionize; operational areas, like details surrounding insurance coverage; and matters of public safety, as illustrated in Austin.
Critics suggest that at least some of the regulation, which comes most aggressively from local government, is aimed at creating an unfair disadvantage for rideshare operators and benefiting their more traditional counterparts.
“Municipal taxi regulators are often captured by the entities they were supposed to be regulating,” argues Marc Scribner, a transportation research fellow at the Competitive Enterprise Institute. “The most promising alternative has been to move transportation services regulation up to the state level.”
In response to the Austin shutdown, many state legislators in Texas echoed the sentiment. “Local control turns to local tyranny again in Austin,” state Rep. Matt Rinaldi said in a message on Twitter, adding, “#txlege needs to intervene.” Another legislator, Rep. Tony Dale, tweeted a similar message that displayed a picture of an Uber coming for him and the words, “See you in 2017.”
In an interview with the Washington Examiner, Rinaldi detailed what a proposal might look like when the state legislature convenes again in January. “I think that what we’re going to be fighting about next session is whether there will be some uniform statewide regulation of ridesharing services that would allow them to operate by preempting city laws that attempt to regulate them out of business,” Rinaldi said.
“I don’t see the need to regulate an industry that owes its existence to being able to operate outside of government regulation,” Rinaldi stated. “Essentially what you have is software that matches people who need a ride with people willing to give people a ride that standardizes the payment. There’s no reason for government to be involved with that process.”
Rinaldi added that while states have an easy case to make when it comes to preempting municipal laws that hinder innovative services, it would be harder to take the same action at a national level because of the constitutional restrictions on Congress.
However, experts note, a lack of action from Congress may not deter other areas of the federal government from taking action, including the courts and regulatory agencies. If that action arises, it may not be beneficial to industry.
“At the federal level, the biggest concern is ensuring that Uber drivers retain their status as independent contractors rather than being forced into an employer-employee relationship,” said Ben Wilterdink, a director of commerce and economic development at the American Legislative Exchange Council. “That is currently the situation, and if there were a change, it would probably be the result of a court ruling.”
Such a ruling could arise, for instance, as a result of legislation being proposed in California, which would give rideshare operators the right to unionize, and end their status as contractors.
From a more optimistic perspective, Scribner suggested, federal regulators could preempt anti-competitive municipal regulations by employing antitrust laws. “There may be a role for the Federal Trade Commission to police municipal governments’ policies when they rise to the level of an antitrust violation,” Scribner said.
“In 1984, the FTC filed antitrust lawsuits against Minneapolis and New Orleans over anticompetitive taxi regulations,” he pointed out. “The suit against Minneapolis was withdrawn after the city revised its ordinance to permit more competition, and the suit against New Orleans was withdrawn after the city convinced the Louisiana legislature to pass a law recognizing their anticompetitive practices and shielding New Orleans from antitrust lawsuits.”
Rinaldi said that while the federal government has not acted to date, he hoped that every state would follow what he anticipated would be Texas’ deregulatory lead next year. “I hope that every state looks at it,” he said.
