Uber’s Lobbying Strategy Fails Again: California declares new carpooling services illegal

Over the past few months, Uber, Lyft, and Sidecar have rolled out another innovative a ridesharing service, this time to allow carpooling between people who commute along similar routes and want to split the cost.

Great, right? The problem is that California regulators have just declared this new service to be illegal.

…The state’s Public Utilities Commission has notified the companies that state law prohibits so-called ‘charter-party cpularriers’ from charging passengers on an ‘individual-fare basis.’

Charter-party carriers can only charge by time or distance to rent out a vehicle, according to Section 5401 of the state’s Public Utilities Code. Limousines and charter buses also fall into this category.

… In an emailed statement, Uber spokesperson Eva Behrend told CBS San Francisco, “We thought we had seen it all, and then the California PUC decided they would try to shut down app-based carpooling. The only conclusion we can come to is that the PUC doesn’t like technology, environmental progress, or anything that might make California a better place to live.”

Ouch. Harsh words for the PUC. But didn’t Uber just get a much ballyhooed “compromise” to its regulatory problems from California?

As reported here by CEI’s Marc Scribner:

In September 2013, after a two-year battle with various regional, municipal, and airport authorities in California, the state’s Public Utility Commission issued regulations governing the licensing and operation of ridesharing companies.

These rules explicitly legalized ridesharing, not by deregulating the transportation service industry (e.g., abolishing the local taxicab commission, limiting or eliminating the state’s regulatory authority), but by created a new regulatory carve-out called the “transportation network company.”

… Ridesharing providers in California now face far more stringent inspection, liability insurance, criminal background check, and drug and alcohol policy requirements than limousines, shuttles, and charter buses.

As Scribner pointed out, this “compromise” strategy of regulatory exceptions for ridersharing is ultimately a failure, because it shackles all future innovation in transportation with all of the inane, expensive, and outdated regulations that Uber had to fight through (and eventually acquiesce to) in the first place.

As should now be obvious, the creation of the new “transportation network company” regulatory class is not in any way deregulation. This is merely regulatory recognition and accommodation. Regulatory accommodation may be a wise short-run strategy to get ridesharing providers legalized or explicitly recognized as legal. However, we must understand that this also creates new political barriers to entry and enhanced regulatory authority, both of which libertarians should oppose in the long-run as we seek liberalization in the transportation sector.

… Rather than lobby for deregulation, as they at least pretended to do in the early days of ridesharing, Uber is now shopping around legislation across the country based in part on California’s regulations. … The post-California accommodation strategy has so far only succeeded in Colorado while it has failed in Arizona and Georgia. This record for compromise is hardly a triumph, and it suggests that regulatory accommodation may not be significantly more pragmatic than pushing for actual deregulation, even if the short-term goal is only allowing Uber and Lyft to operate.

Accommodation isn’t a substitute for deregulation–and Uber’s “California Compromise” isn’t even working in California. And as we are now finding out, deregulation is the only realistic strategy for a thriving, innovative, and competitive transportation market.

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Daniel Bier

Daniel Bier

Daniel Bier is the executive editor of The Skeptical Libertarian.

View all posts by Daniel Bier

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