The Bureaucrats in the Back Seat

Jun 25, 2014 by AFP

By Maddison Abboud

In a high-tech society that values fast, easy, and efficient transactions, smart phone apps are quickly replacing traditional ways of doing business. Ride-sharing apps such as Uber and Lyft are at the forefront of this advanced technology. Through these new apps, users can digitally order cars and limos to pick them up at the tap of their smartphone. Passengers can then track drivers to know how long it will take for their ride to arrive. At the end of a ride, consumers can pay directly on their phones and rate the driver’s performance. The drivers have a similar opportunity to rate their passengers, ensuring that good passenger-driver matches are made for future rides. It is the quintessential free market economy at work – until bureaucratic regulators like the ones in the Virginia DMV come to shut it down.

Ride-sharing apps are helping to eliminate long waits and poor service, but taxicabs fear this competition and are using the government to try to eliminate it. Ridesharing innovation is scaring taxicab operators and protectionist bureaucrats all over the world.

In their effort to crush their rivals, cab companies and their allies in government argue that entities like Uber and Lyft are “unlicensed taxi companies” that do not have to play by the same rules as the existing taxicab operators. They have also attempted to strike fear into the hearts of consumers, arguing that rideshare drivers pose a risk to passengers because they aren’t subjected to the same background scrutiny as taxicab and limousine drivers. They ignore that Uber and Lyft drivers must pass criminal background checks and car inspections of their own, and are insured up to $1 million – more than most cabs. Furthermore, the rating system allows a consumer to avoid a driver with a poor reputation – not an option with traditional taxicabs.

What the cab companies fail to realize is that with ridesharing, both the company and the driver have a vested interest in providing a safe, clean, reliable product. Such is the beauty of competition that would be nonexistent if bureaucrats and cab companies had their way.

In Virginia, Uber and Lyft recently received cease and desist notices from Democratic Governor Terry McAuliffe’s Department of Transportation which command the companies to stop operating. According the DMV, these companies are not acting in compliance with Virginia’s passenger carrier laws and are operating without the proper permits. However, Uber and Lyft are arguing that because they are ridesharing companies, they are not subject the same rules as traditional taxi companies. Clearly, consumers don’t mind Uber and Lyft’s lack of proper permitting, as they have become immensely popular in the Commonwealth and are capturing an increasingly large portion of the taxicab market.

Unlike Uber and Lyft drivers, traditional taxi cab drivers are synchronized on everything from the type of insurance they must purchase to the number of licenses dispensed. These restrictions can make it impossible to fulfil consumer requests in periods of high demand, and can also deter any motivation to provide better service. Over-regulation serves to protect existing interests at the expense of consumers and entrepreneurs.

Even public figures from Republican Senator Marco Rubio to Hollywood celebrity Ashton Kutcher have come to Uber and Lyft’s defense. The battle the companies are facing has less to do with safety and permitting than it does about protecting the special interests of taxicabs that have long been able to do business free from fair competition. It is wrong for bureaucrats in Governor McAuliffe’s administration or elsewhere to be complicit to such cronyism.

Regulations should be used to guarantee basic safety precautions and preserve free market competition in the economy. Regulations should not be used as a tactical measure to suffocate innovation. Policymakers need to relax their grip on the paid-rides industry, and eliminate unnecessary limitations that are preventing fair competition. Consumers should be able to use and reward upgraded service at their will, and ride providers should be able to innovate and improve as they see fit. Legislators and government bureaucrats need to give them the opportunity to do so.