The ridesharing business model is under attack across the globe. The last month has seen the car service Uber banned in India, Spain and Thailand. Last Monday, the city of Portland, Ore., filed a lawsuit against Uber seeking to halt the company’s operations.
Portland is not the first location in America to attempt to ban Uber, but the city’s lawsuit is unique in that it allows both sides to examine explicit arguments made against Uber’s business model. In bold below are actual complaints against Uber, accompanied by analysis on how they affect consumers.
• Uber cars aren’t painted unique colors and don’t have taximeters. These regulations exist to identify taxicabs from non-conveyors and to make sure that the taxi drivers charge fairly and transparently. Since Uber drivers operate under a predetermined payment schedule that the rider agrees to beforehand and their payments take place behind the scenes, there’s no commonsense reason why a service such as Uber should have to comply with these rules.
• No more than 65 percent of a taxi company’s cars may be located within one mile of the Portland airport at the same time. Uber has a unique model where drivers can travel to where demand is highest for their services. Consumers benefit when they’re able to be conveyed with the shortest wait and lowest fare. If there is a one-hour wait for a pickup at Portland’s airport, I’d hope that all resources would be available to move travelers along. This also seems to be a uniquely unenforceable rule for traditional taxicab companies.
{mosads}• Taxicabs are subject to a $2.50 initial charge for one passenger and $1.00 for each additional passenger, a waiting charge of $30.00 per hour and no more than $2.30 per mile traveled. UberX service is available in Portland for a base fare of $1.50, plus 30 cents per minute, plus $1.55 per mile with a $1.00 per ride “safe ride fee.” For a 10-mile ride for two that would normally cost $26.50 in a taxi, Uber will charge $21.
• Portland city code requires that limousine and executive sedan services must be 35 percent higher than the prevailing taxicab rates for the same route. It’s not the role of the city government to protect taxicab drivers by making limousine rides unattractively expensive. When a better service is provided for the same or less expensive fare, the consumer wins and the economy benefits.
• All limousine and executive sedan service must be provided on a prearranged basis. Prearranged is defined in administrative rule and means that 60 minutes must pass between the time that a reservation is made and the time that the customer is transported. This is a golden egg for proponents of Uber. Here we see a city government telling the company that one of the reasons that they are not allowed to operate is because they pick up passengers too soon after their services have been requested.
• Customers hail a car through the app instead of a human dispatcher. Here Uber solved a problem with taxi dispatching in a novel, more efficient way and the city of Portland is asking them to “make work” in order to solve it in the less-efficient way other companies use.
• Unauthorized use of the image of the historic “Portland, Oregon” sign in Old Town in an Uber blog post. This sign was built in 1907 and acquired by the city in 2010. Large businesses (such as Uber is classified) are permitted to “use the sign incidentally for $600 or for merchandizing for $1,100.” In this case, though, the penalty for misuse is a cease-and-desist suit.
The lawsuit additionally “asserts that Uber also applies an additional surge pricing.” Surge pricing is the practice of Uber’s rates rising when demand for rides exceeds supply for drivers. I wonder if the head of the plaintiff has ever tried catching a taxicab near Dupont Circle in Washington, D.C. on Halloween or within a half mile of Times Square on New Year’s Eve.
Without additional income potential, there is no incentive for taxi drivers to brave traffic, crowds, weather or drunk revelers to make the same fare they make on a weekday airport run. Surge pricing can be viewed as a tax on the consumer, but it’s part of an agreement that the consumer enters into willingly. More importantly, it serves as an excellent incentive for the service provider to allocate his resources where supply is most needed.
It is no surprise that taxi commissions are fighting the company and its competitor Lyft with all the resources they can muster. What is a shame is that the city of Portland, like the governments of Spain, India and Thailand, is working for the well-being of these special interests rather than that of its citizens.
Colangelo is executive director of Consumers’ Research.