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Rideshare and taxi services butt heads as city mulls its options

You’re running late and need a ride to make it to dinner with friends.

Do you hail a cab on the corner or use an app to request a pickup from a growing number of rideshare services such as uberX, Lyft or Sidecar?

That choice is creating friction between the taxi industry and rideshare companies. The competition it has sparked has even led to a legal battle in Chicago federal court with the most recent lawsuit filed on Thursday. The taxi industry—with more than 11,700 licensed drivers in the city—says that rideshare companies, which rely on drivers in private vehicles, unfairly compete with taxis because they don’t play by the same city rules covering rates, licenses and fees. Rideshare companies contend they are not operating as transportation companies, but rather as technology companies with apps to connect riders to drivers—much like a travel booking platform.

As city officials look at how other cities have handled the conflict, passengers are left with more options than ever before—which can be unpredictable, particularly when it comes to prices.

Last month, Uber lowered its uberX fares by 15 percent, and Sidecar changed its policy to allow drivers to set their own prices, undercutting taxi drivers—all this after rider backlash from a spike in prices on New Year’s Eve and during bad weather when demand was high.

Meanwhile, cab drivers are allowed to charge only metered rates set by the city, and their cars are required to display city-issued medallions that can cost more than $300,000 to own. Additionally, all drivers are required to hold a chauffeur’s license, serve the entire city and people with disabilities. Some drivers lease their cars and work with cab affiliations for dispatch services. Rideshare drivers do not have such regulations.

“All we keep saying is we just want to play by the same rules as these other companies that have emerged in the market and we’re not getting the same treatment. So something needs to change,” said Erica Rapoport, public relations director for Flash Cab.

The lawsuit filed on Thursday by cab companies and drivers is against the city for failing to enforce its rules for taxi services and allowing rideshare companies to operate.

“Unfortunately the Emanuel administration has tolerated an unlawful taxi caste system created by Uber, Lyft and Sidecar and now the administration proposes to ratify that caste system by ordinance. It is an exclusionary, elitist taxi system operated side by side with the lawful, highly regulated taxi system our clients and their customers have engaged in with the city’s consent and requirements for many years,” said attorney Michael Shakman, who filed the suit.

The lawsuit came one day after Mayor Emanuel introduced regulations for the rideshare industry including licensing companies annually as “transportation network providers” with a fee of $25,000, requiring vehicles to pass a 21-point inspection, and mandating companies have $1 million in commercial general liability insurance and commercial auto liability insurance.

Regarding the lawsuit, Andrew Macdonald, regional general manager for Uber Midwest, said in a statement, "While they spend time in court, we'll be working with Mayor Emanuel to design a forward-looking regulatory regime that creates economic opportunity, prioritizes safety, and ensures access to the best, cheapest rides ever available in the city."

The city's proposal would require drivers to complete a training program and pass drug tests and background checks, limit how rideshare drivers can charge rates either based on distance or time or flat fee, and prohibit the drivers from dropping off or picking up passengers at the city’s airports and McCormick Place. The city, which collects revenue in the licensing of cabs, would also charge rideshare companies the ground transportation tax.

“Ride share companies are using technology to provide innovative new transit options to residents but are operating in a regulatory vacuum,” Emanuel said. “This ordinance includes common sense rules of the road that will protect consumers, keep riders safe, and allow these companies to continue to operate.”

Rideshare companies set driver and vehicle requirements and say they check criminal backgrounds and driving histories. Although the companies provide commercial liability insurance, drivers are required to have personal car insurance. There is uncertainty over whether the driver and car are covered while giving rides to paying customers.

Such complaints by the cab industry are common in other cities, Macdonald said. “The cab industry is an industry that is ripe for innovation. I think what you see is a bit of natural tension with regards to how new technology makes things friendly for consumers,” he said.

Chicago has been innovation-friendly, Macdonald said, and seems to be open to the apps.

Ridesharing companies, which get a cut of the drivers’ payments, say they provide a cheap, reliable option and personal experience for riders. They give riders the option to rate the ride and the convenience of electronically paying for a cab.

Macdonald said Uber believes in safety regulations but is concerned about restricting fares and places where drivers take passengers. Lyft saw the proposed ordinance as a starting point and looks forward to working with the city.

Cab affiliates like Flash worry that rideshare companies will lure taxicab drivers away because rideshare drivers face minimal costs to operate.

If fewer drivers are affiliated with cab companies, there will be fewer taxi drivers answering orders for cabs from the dispatch computer, making it more difficult to serve customers at the standard meter prices who request cabs, they say.

And customers are in a Catch-22, according to Rapoport: “These two times as much, three times as much the meter rate prices [that] customers are paying on holidays, busy days and snow days, they’re essentially being self-inflated because they’re giving rideshare services the business.” | @lvivanco

Copyright © 2015, RedEye
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