Asymmetrical Information - Megan McArdle

09.20.12

DC Taxi Commission Still Gunning for Uber

The DC government has proposed yet another round of taxi rules which promise to make life hard for Uber. Is this really necessary?

As I chronicled in the Atlantic six months ago, upstart limo dispatch service Uber is embroiled in a long-running war with the DC taxi commission.  Uber allows you to order a sedan service from your smartphone, and is much beloved by affluent DC DINKs.  It is also a favorite of the limo drivers, who like being able to get rides at good pay rates, and without paying kickbacks to the dispatchers.  A couple of nights ago, I took an Uber to a work event (you still can't reliably get a cab in my neighborhood), and the driver told me that he'd just bought the shiny new Lincoln he was driving to strike out on his own.  Uber is what made that happen, according to him; under the old system, it was hard for drivers to go solo, because there are network effects in black car services-; large services tend to get most of the clients.  He was beaming as I inspected his brand new wheels, as proud of that car as if he'd baked it himself.

However, Uber is not beloved of DC taxi drivers.  As Bob McNamara of the Institute for Justice told me, "Like any other business, taxi drivers think it would be great if no one could compete with them.”  Taxi drivers and owners provided a lot of support for our current Mayor, Vincent Gray, in his hotly contested primary race with former Mayor Adrian Fenty.  (They also seem to have offered some illegal support to the city council staff; one member's former aide got jail time for accepting bribes.)  The commission has become quite cosy with the industry incumbents in recent years, to the point of issuing a de-facto moratorium on new taxi and limo licenses.  The election did nothing to reverse that relationship.

The taxi commission has been gunning for Uber since last year, when they launched a "sting" featuring Commission head Ron Linton, which ended in the unlucky driver having his car impounded.  Originally they said the service was illegal because you couldn't use a black car to charge for time and distance; when Uber's supporters pointed out that the taxi code contained a "sedan" designation that seemed to allow black cars to do just that, they suddenly came up with a new rationale: Uber was illegal because it didn't offer you a paper receipt.  I was unable to find an Uber customer who expressed any desire to have a paper receipt, but perhaps they are out there, frantically lobbying the taxi commission.

As I reported in the piece, Uber beat back the initial crackdown by mobilizing its dedicated fans. A couple of months ago, new rules the city council came back with new rules which would have prevented Uber from competing on a cost-basis with taxis (currently, the service is about 50-100% more expensive); Uber again mobilized its customers, and the matter was tabled.  

Now they're trying to do it again, as the taxi commission proposes yet another set of rules.  Among other things, the rules would prevent any sedan company with fewer than 20 vehicles from operating in the district, force companies to have an office in the district (Uber does, some like competitors don't), and require, yes, printed receipts.  

I'm a sometime customer of Uber's (in a nice reversal of the usual conflict-of-interest statement, I pay them, rather than the other way around), and I've always found their service exemplary.  I've been completely stonkered by the relentless drive to regulate Uber in ways that would degrade its value to customers and drivers, wtihout even the customary pretense that DC citizens are suffering real harms that the regulations will finally alleviate.  No one's even really bothering to pretend that there is any problem--other than the obvious fact that DC taxi drivers don't like competition.

According to Greater Greater Washington, Commissioner Linton "vehemently denies" that he's trying to hamper Uber's business, but his excuses for these rules are pretty thin.  They can't have small car service operators, he says, because it would up the commission's workload. Given the number of employees I saw sitting or standing around, like the security guard whose sole job is apparently to prevent anyone from entering, or taking pictures of, the offices, I would suggest that the commission's workload problem seems to be administrative rather than volume driven.  If the taxi commission really hasn't been capable of processing a new application in almost four years, perhaps we should outsource their work to the folks at the Apple Store, or for that matter, the DC DMV, both of which seem able to process thousands of applications a week.

The printed receipts claims are even more ridiculous; Commissioner Linton says they are necessary to keep people from being cheated by drivers who let Uber's "meter" run.  But you get a bill with your time and dropoff location right on it.  And Uber drivers depend on ratings to get their next ride; drivers with low ratings get kicked off the system.  It's particularly ludicrous given that DC taxi drivers currently don't give printed receipts; half of them still hand out blank forms.  Linton claims that they've "gotten complaints" about Uber not having printed receipts, but if so, why not start by cracking down on the cab drivers who are abetting expense and tax fraud?

For all Linton's lip-service to "leveling the playing field" (strange how that phrase is almost exclusively employed by politicians trying to shut out upstarts for the benefit of incumbents), this is fairly blatant anti-competitive rent-seeking.  I'm not one of those libertarians who thinks that we should allow the regulation of nuclear power plants to be handled by the free market and the liability system, but I would like to hear about real, large harms (to someone other than the competition) before the government kicks off the rule-making frenzy.  Because this is how anti-competitive local regulation works in the real world: you impose some extra cost with some stupid, yet almost plausible, pretext, all the while claiming that you're really doing it for the consumer.  

In kinda-sorta fairness to the commission and the politicians, presumably making life harder for Uber is part of the payoff to the taxi industry to get them to do things that consumers actually want, like install credit card machines.  At first reading, these rules don't seem nearly as noxious as the last round, which contained a "pro consumer" price floor on Uber's services.

And yet, what sort of devil's bargain is this, where politicians try to "help" consumers by dealing a body blow to a successful business in order to cajole some other business to do stuff that consumers like?  There is presumably room in the market for taxis that don't accept credit cards, and Uber cars that accept nothing else--if only the taxi commission would get out of the way.