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1. New York City Taxi Medallion Managers Pick a Fight with Uber

While a major battle in the City’s fight against Airbnb came to a conclusion yesterday, today the start-up wars open a new front, and now its Uber that is under attack. The NYC Medallion Managers are banding together to take on Uber, the car service application. The Medallion Managers are looking to make sure Uber pays the proper sales taxes, and are accusing Uber drivers of posing a potential threat, and attacking Uber’s insistence that they are a ‘tech’ company rather than a car service.

The Medallion Managers make the argument that Uber has not been regulated or investigated yet because, according to someone close to the Medallion holders, who declined to be identified, “Micah Lasher is chief of staff [to the Attorney General]–and Bloomberg hated cabs.”

Mr. Lasher was an aide to Mayor Bloomberg before he was appointed as the Attorney General’s Chief of Staff in March. Mr. Lasher worked diligently on legislation which banned “illegal hotels”, even boasting that he “wrote” the law that Airbnb is now challenging. While Mr. Lasher came from an administration that may have “hated cabs”, his new boss has already taken to investigating Uber.

Attorney General Eric Schneiderman has been looking into Uber’s pricing model, specifically what he believes may have been price gouging during Hurricane Sandy. According to Uber itself, the company took a $100,000 hit to prevent prices from increasing during Sandy.

In a phone interview with Betabeat, Mr. Roberts explained that Uber’s wish to be seen as a tech company, rather than a car service, is a major issue: “We believe Uber should face regulations — not the same regulations as us because they aren’t yellow cabs. They should face the same regulations as the black car services, FHVs [For-Hire-Vehicles]. Uber owns FHV base licenses but claims not to be dispatchers.”

The “bases” Mr. Roberts takes issue with Uber operating are exactly like the bases black services are required to use. However, Uber does not use dispatchers the way a black car service would.

“If you call Uber, you can’t get a dispatcher on the phone, which is to my knowledge unheard of. They have these bases that can’t dispatch cars via phones,” Mr. Roberts said, “It walks like a duck, it looks like a duck, but it’s quacking something completely new.”

Uber Head of Communications Lane Kasselman offered Betabeat this explanation for Uber’s use of both bases and FHV licenses, “In NYC, in order to dispatch for-hire vehicles, entities must be licensed as a base with the Taxi and Limousine Commission (TLC). Uber has established subsidiary black car bases.  All cars affiliated with Uber NYC (uberX, UberBLACK, and UberSUV) must be registered with a base.”

This point of contention seems to be more a technicality than a major flaw in Uber’s ability to comply with city regulations.

Uber is operating the bases because they are legally required to, they could not run their service within TLC regulations otherwise. Their form of dispatching requires an app, rather than a phone call. This technologically advanced dispatching does not seem to break any existing TLC regulations, as other black car services like Carmel offer a similar app.

There is also the question of drivers. In order drive a taxi or black car in New York, you must be licensed through the Taxi and Limousine Commission.

“We go through a vigorous TLC background check and finger printing, drivers have to take a class before they take the test, then take a test to prove they know the city,” said Mr. Roberts, “There is a concerted effort to keep convicted felons from driving. It is my understanding Uber does not do this.”

Mr. Kasselman replied to this, explaining, “In NYC, each driver is commercially licensed and goes through a rigorous background check by the City of New York’s Taxi & Limousine Commission — all details of the check are publicly available on their website. In New York, we partner only with drivers who are licensed through the TLC. Uber takes steps to ensure it partners with the best drivers – drivers go through a rigorous onboarding process that includes a city knowledge test which drivers must pass before partnering with Uber.” This past February, Uber did, in fact, experience an issue with background checks in Chicago, in which they missed a felony conviction on the record of one Uber X driver in the background check process.

As for the sales tax, this is one of the hidden pieces of information on an Uber receipt. Instead of a detailed receipt, one round number appears at the end. Mr. Roberts points out that in New York, yellow cabs pay $.50 in tax per trip, totaling at least $87,500,000 in MTA taxes. He prides the tax transparency of the yellow cab industry, and finds Uber offers the opposite.

“As we know from public filings in other states, Uber claims to be a technology company rather than that which they are – a technology cab company.  As such, do they pay sales tax to the State of New York, as do all other transportation companies? Their so-called ‘receipts’ do not show what – if any – taxes are paid. Does Uber pay taxes? Or their drivers, who they claim don’t work for them?  Sounds like none of them.”

According to Uber, the company does pay its taxes.

Mr. Kasselman explained that “The Uber platform creates a seamless experience for riders, including a simple fare display that includes 8.875% sales tax and tolls.  We remit this sales tax to the State of NY every month.” Additionally, had Uber not paid sales tax over the last year, the government would likely have intervened. This would have been a massive problem for any company, especially one as large and profitable as Uber.

Medallion Managers have a right to their fight, but their argument that “[Uber] can operate above the law” will require a great deal of investigation from city officials. Though the Attorney General has taken issue with their pricing system, it seems their taxes are being paid regularly and to the proper amount. City Council Members will likely weigh in on the issue of driver history and larger regulation as lobbying continues, though some officials are likely to side with Uber in an effort to preserve the NYC start up scene. Governor Andrew M. Cuomo has also shown his support of the city’s booming technology market, recently cutting Etsy a $5 million tax break.

Once the Medallion Managers feel confident that Uber is regulated and taxed similar to black car services, Mr. Roberts believes they can coexist.

“I don’t see any reason why we can’t coexist. It’s a free market place. But the current way Uber runs its business is untenable,” Mr. Roberts said. “Particularly when you have the most well regulated and safest taxi industry in the country.”

The root of the issue remains: how can Uber act like a car service, while its website reads “Uber is not a transportation provider.” Whether Uber chooses to call itself a car service or a technology company, it has thus far complied with all TLC regulations, hires drivers vetted by the TLC, and pays their taxes accordingly.

2. Can the FTC Save Uber?

Taxi commissions are crushing disruptive transportation apps.

In 1984, the Federal Trade Commission released a report that explained why taxis could charge customers exorbitant prices for dismal service. The simple reason, according to the 176-page study: lack of competition in the market. The culprit: local governments. City agencies that regulate cabs, generally called taxi commissions, were deliberately protecting from competition the very companies they were supposed to police. With no legitimate safety- or health-related reasons for doing so, the taxi commissions artificially limited the number of cab companies competing on the streets by restricting the number of available licenses. Armed with this report, the FTC took action. It made an example of two of the worst markets, Minneapolis andNew Orleans, by filing lawsuits against the local governments and accusing them of illegally colluding with private taxi companies to crush competition and fleece residents. (The results of those lawsuits were mixed—more on that in a minute.)

In 2007, two decades after those cases settled, the FTC noted that the taxi industry remained largely uncompetitive. The FTC staff also observed, however, that “telecommunications advances” might help to disrupt these uncompetitive markets.

Today, this predicted disruption might finally be on the horizon, exemplified by companies like Uber, SideCar, and Lyft that all created mobile apps to revolutionize the ride-for-hire market. But, as before, city taxi commissions are working to stifle competition.

Most recently, Las VegasWashingtonChicago, and Cambridge, Mass., have all tried  to ban Uber, the San Francisco-based startup that connects riders to luxury black town cars and SUVs on the fly. Other cities’ ordinances are hopelessly stacked against the company. Miami’s requires impossibly expensive minimum fares ($80), while Cambridge attempted to shutdown Uber altogether, claiming that since a national standards and measurements body had not certified the company’s use of GPS technology for taxi metering, Uber was violating the law. (Cambridge relented the following day.) New York City, which last year declared Uber illegal, is nowcautiously experimenting with the company but has not fully committed to allowing it to compete.

Younger companies like Lyft and SideCar disrupt transportation in a different way: Anyone with a car and background check can provide rides to a willing rider for a suggested fee. These companies have faced their own issues. SideCar planned to offer rides during SXSW, the annual technology festival in Austin that helped launch Twitter and Foursquare into public consciousness years ago. But the city of Austinthreatened to shut SideCar down and arrest willing drivers during the festival. SideCar responded by offering free rides and then filed a lawsuit against the city of Austin, arguing that their business does not violate Austin’s Transportation Code.

Uber, SideCar, and Lyft are not simply a fad—they are the first indications of a transportation revolution now receiving considerable venture investment. So far, these companies have battled incumbent taxi companies city-by-city, facing off against city taxi commissions that are biased against them. But the harms they’ve suffered will only continue to grow, necessitating a decisive solution, and one from a forum that isn’t effectively controlled by the taxi industry. Three potential avenues are at our disposal: the FTC, state governments, or Congress. And they should be explored in that order.

It might seem odd to call for a federal agency like the FTC to take action in what appears to be a purely local issue. But not only does the FTC have the authority to take these cities to impartial federal courts and end their anticompetitive actions; it also has deep expertise in taxi markets and antitrust doctrines. By law, the FTC’s power to regulate “interstate commerce” is just as broad as Congress’, and that power is famously far-reaching, even covering the growing of plants at home for purely personal use. Here, as the agency noted in its 1984 cases against Minneapolis and New Orleans, the FTC could regulate local taxi markets merely because interstate travelers take taxis (and Ubers) to and from the airport when they fly across state lines. Moreover, Uber, SideCar, and Lyft are California-based technology companies competing in multiple states.

The FTC’s general antitrust authority, however, only sometimes outranks city authority. Under the Constitution, federal law trumps both state and city law. But antitrust law allows states some exceptional leeway to adopt anticompetitive business regulations, out of respect for states’ rights to regulate business. This federal respect for states rights does not extend to cities—they are subject to the antitrust laws unless states pass legislation absolving them. For example, Minneapolis ended up avoiding the 1984 lawsuit by acceding to the FTC and permitting more competition. New Orleans did something different: It succeeded in lobbying the state of Louisiana to authorize its anticompetitive actions, to the detriment of consumers.

Some states, including Florida, Nevada, and Texas, could argue that like Louisiana, their laws currently authorize the city governments to undermine competition in their taxi markets. Nonetheless, the FTC should test the law in these states with litigation, as the Supreme Court’s position is unsettled. Under the few Supreme Court decisions spanning the past several decades, cities can engage in anticompetitive acts only when the state legislature “clearly articulated” and “affirmatively expressed” a state policy to displace competition and replace it with an uncompetitive market. To complicate matters, the court “disfavors” interpretations of state law that permit anticompetitive city regulation, yet it still permits city anticompetitive action even it is merely a “foreseeable result” of the state law. Put all this together and the FTC can likely argue that state taxi authorizations do not foresee anticompetitive restrictions on apps like Uber and services that permit average citizens to tip one another for a ride. At the very least, Washington, D.C., is not in a state, so no state law can protect it from the FTC’s antitrust powers.

But if the FTC was unable to secure a court victory against a particular state, that state’s government could intervene. States are probably not as beholden to the taxicab industry as are local taxi commissions. Their legislatures or agencies could easily either pull back any specific authority they’ve granted to city governments, or clarify that those powers are not so broad as to block communications technologies that connect users to black car drivers or to one another. Indeed, states might feel pressure to do so, lest they appear either supportive of anticompetitive policies in their cities or powerless to change those policies.

Should the FTC or states not rise to the task, Congress can preempt all of the problematic state and city statutes by passing a one-sentence law. There is precedent for such action. For example, with respect to mobile phones, Congress declared in 1996 that “no State or local government shall have any authority to regulate the entry of or the rates charged by any” mobile phone company. The same can and should apply to taxicab services. This solution should be politically feasible: Both Republicans and Democrats can agree that more choices and lower prices in transportation would benefit consumers. Democrats would consider it “smart government” and Republicans “limited government.”

While taxi companies might prefer not to face competition, they deserve no more protection from it than did horse-and-buggy salesmen in 1905 or MySpace in 2005. Like Uber, Sidecar, and Lyft, they deserve no more and no less than a fair shot in a competitive market. The FTC, states, or Congress itself should step in to make that possible, lest city governments run competitors off the road.

This article arises from Future Tense, a collaboration among Arizona State University, the New America Foundation, and Slate. Future Tense explores the ways emerging technologies affect society, policy, and culture. To read more, visit the Future Tense blog and the Future Tense home page. You can also follow us on Twitter.

3. Rides wanted, taxis refuse to pick up:

Posted on May 5, 2014 at 10:25 PM

Updated Tuesday, May 6 at 3:27 PM

AUSTIN -- A KVUE Defenders investigation caught Austin cab drivers breaking the law by refusing to give customers rides.

From 2012 to 2013, city records show reports of taxi complaints increased 78 percent. Many of complaints involve taxi drivers refusing to pick up customers.

"I mean, if you’re just going a short distance, a lot of times I’ll just get left on the side of the street," said Dan Imken, who lives about two miles from downtown.

Over the past few months, viewers have emailed and called the KVUE Defenders to complain about cab drivers driving off from customers requesting a short ride, which typically means a small fare.

To find out what's happening, the KVUE Defenders went undercover and spent two nights downtown on West Sixth and Fifth streets, requesting a ride to Rainey Street. It’s roughly a 1.5-mile drive.

While many cabs the Defenders hailed agreed to give a ride, it didn’t take long to catch a taxi refusing to give a lift.

On the first night, two cabs simply drove off as soon as the Defenders requested a ride to Rainey Street. The drivers offered no explanations. A third driver said he would only accept the Defenders as passengers if they paid at least a $10 fare.

At the end of the night, the Defenders witnessed a cab refuse to give an unidentified woman a ride who wanted a lift outside downtown.

"So, basically, he said, 'Where are you going?' and we told him, and he said, 'No, I’m not going to take you," she said.

KVUE has decided not to identify the cab drivers at this time.

On the second night, two cabs refused to provide the Defenders a ride within five minutes. They also witnessed another person, Alex Mathebet, trying to get a ride to North Austin for more than an hour.

He said he was denied multiple times.

"Three times, all on this street. Maybe they have a reason, I just don’t know what it is," said Mathebet.

The KVUE Defenders showed the video to Austin’s assistant transportation director Gordon Derr, in charge of regulating taxies.

"Under city code, that’s illegal," Derr said after viewing the video.

By city ordinance, there are a few reasons a taxi driver can refuse service. Fear for their safety and inability to pay are among those reasons.

Derr says he didn’t see that in the video captured by the Defenders.

"It certainly points out that we have more work to do with taxi drivers and the taxi franchises and the whole vehicle for hire community," said Derr.

The KVUE Defenders also took the video and the city’s concern to Austin Yellow Cab president Edward Kargbo.

"It is a very, very extreme concern for us," said Kargbo in reaction to the video.

Kargbo admitted it’s a big problem, not limited to his company, that needs to stop. He said Yellow Cab will take immediate action if it’s reported to them. That means potentially cancelling contracts with drivers.

"So, if it’s one trip a night that’s not getting service for no good reason, we want to be able to enforce the ordinances to make sure that doesn’t happen," said Kargbo.

The city said it has conducted similar undercover operations to catch drive-offs, but admitted it needs to do a lot more. Both the city and the taxi companies want people to report drive-offs.

The best way to report taxi drive-offs is to get the taxi’s identification number painted on the vehicle so the city knows exactly which drivers are doing it the most. That ID number is typically printed on several sides of the vehicle (pictured above). 

The city also suggests taking a picture or even video with your phone if you can.

If observed or verified, a taxi driver who refuses to transport someone could face a Class C misdemeanor. The actual fine would be determined by judge.

If you have a problem with a taxi in Austin, you can submit a complaint to the city. You can also go here to submit an online complaint.

Local group ATX Safer Streets advocates for improved transportation options in Austin. If you'd like to give feedback on transportation options in Austin, go here for their survey.

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