BY SUSAN ROSE
Last year when we published our first article on Uber, the media (outside our industry) was almost unanimously positive about the smartphone app. Back then I said it was going to take a person or people getting hurt—or worse, killed—to really thrust Uber into the regulators’ crosshairs. Sadly, it did happen, and now Uber is currently facing some serious questions.
My prediction came true simply because of the laws of nature. After all, why are taxis and limousines so heavily regulated in the first place? It’s for the same reason that California will require a fifth door on a limousine—passenger safety was called into question. Fight it, and you run the risk of excoriation from a safety-sensitive public. Uber is starting to feel some of that pressure for the first time.
It’s probably become part of your conversation as well. Just to be clear, Uber offers several levels of service: Black, SUV, UberX, and Taxi. Black and SUV are meant to act like upscale taxi services, but are the two that compete most directly with our industry. Uber Taxi and UberX, its lower-cost ridesharing service, are in far fewer cities than the first two, but drivers use their personal vehicles and are less regulated than any of the apps. Other companies like Lyft and Sidecar compete for rideshares as well.
It’s important to note that while Uber may be in the spotlight due to the New Year’s Eve pedestrian death, the majority of the regulators have shifted their attention away from services like Uber Black to ridesharing apps like UberX, Lyft, and Sidecar. While our industry hasn’t let up on the fight, it’s clear that the focus has been redirected to the more contentious, less insured, and woefully unregulated rideshares.
Where Are We Now?
Trevor Johnson, director of The San Francisco Cab Drivers Association probably said it best in The New York Times: “Uber may be the next Amazon, but Amazon doesn’t have the same potential capability to leave a trail of bodies in the street.” Johnson is, of course, referring to the death of 6-year-old Sofia Liu who was hit in a San Francisco crosswalk by Uber “freelancer” Syed Muzaffar on New Year’s Eve. The driver was promptly removed from active service with Uber and the company distanced itself immediately from the case. The problem is, the California Public Utilities Commission created a new category for these apps called “transportation network companies” or TNCs. Uber and others were required to comply within 45 days of the September ruling, which included $1 million insurance policies on drivers, background checks with fingerprinting, and thorough vehicle inspections. Uber is fighting the classification and has vowed to fight any responsibility in the wrongful death lawsuit as well. Sadly, after Liu’s death (and injuries to some family members), it was reported that Muzaffar had a record of reckless driving in Florida. It later was revealed that Uber was lax on conducting background checks, especially through the tougher Live Scan fingerprint checks that are also run through FBI databases for a more thorough and up-to-date record. In January, Uber extended its background check nationwide.
Matthew Daus, president of the International Association of Transportation Regulators (IATR) and former head of the NYC Taxi and Limousine Commission, has some theories about where things are heading with Uber. With Google as one of its biggest investors (through Google Ventures), Daus says that it’s all about collecting data, which the massive search engine/all-around technology giant craves. “Google wants the data, while Uber wants to sneak in and deregulate the industry so that it can get its [initial public offering]. Once that happens, they’ll turn around and say, ‘Of course we need regulation.’ That will lead to increased prices.” That would mean driving some out of the industry altogether while possibly devaluing the pricey taxi medallions. (Others speculate that the Uber-Google relationship will lead to a platform for autonomous vehicles, which Google is investing in.)
That IPO could mean big—and I do mean BIG—paper. If you live in or around Silicon Valley, you already know that Uber is the hottest thing going. The investors just keep piling on, so there are high hopes for the company’s upward trajectory. Uber’s most current valuation is $3.5 billion (yes, with a “b”), but there are many who feel that is highly undervalued. Some estimates say Uber could be $100 billion within 5 years. An IPO would keep the cash following.
Big money and flashy, one-percenter names attached to Uber could have bigger consequences than just an endless pool of marketing dollars and expensive lobbyists. This means that regulators and politicians could be having a harder time standing up to the app. When your position relies on donors who have deep pockets, combined with an intense public love for the service, it becomes very difficult to say no. The taxi industry isn’t immune to this type of politicking, but there’s a new game in town and there’s more money than ever at stake. And for the record, we are not suggesting nefarious backroom deals are taking place (like Uber does in the next paragraph), but we're also not stupid. Money and politics are the oldest friends in the world.
Uber has clearly joined the “if you can’t beat them, join them” club. For example, Uber’s Corey Owens blogged about his experience in Portland last summer in a post called “On Consumers, Competition & Collusion.” The blog read: [L]ast week I testified before the Portland Private-for-Hire Transportation Board of Review, which regulates taxis and limousines in the Rose City. I was asking this official government body to do away with rules that force sedans to wait 60 minutes before picking up the requesting passenger, that explicitly prohibit the use of cost-effective vehicles, and that artificially inflate prices for sedan transportation. I was requesting these changes of a regulatory body made up of taxi companies and their allies. The marriage between government and industry in Portland is hardly the only example. In Dallas, Yellow Taxi’s lawyer worked with city officials to organize a fruitless sting against Uber. In Colorado, Public Utilities Commission staff proposed anti-Uber regulations after a local taxi lobbyist wrote to them pleading for ‘rules changes’ to address the Uber ‘issue.’ In Missouri, the chairman of the Metropolitan St. Louis Taxicab Commission is a lobbyist who walks the halls of state government on behalf of the Commission, which is primarily made up of—you guessed it—taxi companies. This is regulation by the taxi industry for the taxi industry. Consumers’ interests are getting bulldozed by lobbyists, campaign contributions, and cronyism run amok.”
The passage is near laughable considering that Uber has been allowed to operate in nearly every city either with the mildest of regulations or none at all as the battles continue. Does Uber not understand that regulations ARE in the interests of consumers? Furthermore, Uber has hired its own high-dollar lobbyists to stoke the flames. (Read the full blog here, where Owens goes on to blast IATR: http://blog.uber.com/threeCs. You can read Matt Daus’ reaction to that blog here: http://bit.ly/Os3N86.)
Media’s Learning Curve
It would be erroneous to say that the majority of media coverage has shifted, or that reporters and bloggers accurately represent why our and the taxi industries are up in arms, but a more critical eye has been cast of late. Here is a sampling of recent Uber press:
• It announced that it will now charge drivers a $10/week charge for company-provided cell phones to offset the cost of data plans (the email to drivers said it was to “encourage responsible iPhone use and prevent waste”).
• It is being sued in cities like San Francisco because drivers claim it garnished their tips; the lawsuit was given the green light this January to proceed.
• In a stealthy new tactic to recruit more drivers, it was reported in the San Francisco Chronicle that Uber was using bogus pickups to help recruit drivers from Lyft. Using a tag team of attractive females, the recruiters offered free gas cards and sweet bonuses if the driver switched.
• Recruiting story #2: Uber ordered 100 cars from a black car company in New York and then cancelled last minute. This was similar to a denial of service attack that some use to block others from a website by clogging up the servers all at once. The end game, according to The New York Times, was to get the drivers’ phone numbers and then solicit them. Uber capitulated and said the tactic was “too aggressive.”
• It is under fire for not providing comprehensive background checks on its drivers.
• The biggest of them all is the death of little Sofia Liu, who was hit by Syed Muzaffar, an Uber “freelancer.” Muzaffar was decommissioned as an Uber driver and the company has distanced itself from the case. The Property Casualty Insurers Association of America is now raising serious concerns about the gap of insurance coverage between when a driver has a customer and when he’s waiting for the next customer. Muzaffar was not carrying a passenger at the time, but the wrongful death lawsuit suggests that he was still working for Uber at the time.
• Surge pricing during storms and large events is still ticking off consumers. Uber drew national attention when Jessica Seinfeld (wife of Jerry Seinfeld) slammed the company after charging her $415 for one trip. Other celebs and real-life users joined in, taking to Twitter to voice their frustration.
• As more taxi companies are working for Uber, the disabled—who would likely benefit the most from a smartphone hail—are being shut out of the transportation market. Poor and minority communities without smartphones are also affected, which could lead to “transportation deserts.”
• Fast Company recently declined to include it on its “Most Innovative Companies” list because: “ Uber’s relentless brand of hypergrowth is causing its service experience to suffer, leading to poor decisions on how it treats its drivers, local regulators, and, most important, its customers.” Ouch.
Educating the Public
Uber is now in over 80 cities worldwide and has been met with objection nearly every time from existing taxi and limousine companies. Local associations have been pooling resources to fight back, but it’s hard when Uber has such an underground swelling. I reported last year that Uber launches in a city by first offering completely free rides to tease the public. It beats local taxi service, and the car is often what you would get with limousine service. Uber also is hiring like crazy, so you can bet that it has a large team in place long before it launches in a city.
Why Uber became so mainstream in so many places is partially our fault. In many cities, taxi service is abysmal (that doesn’t let limousine companies off the hook, either). Consumers complain that only some cabbies have working credit card machines (some cabbies claim theirs isn’t working to conveniently avoid reporting tips), or note that credit card receipts print out blank. Some taxi services have been known to artificially limit their driver pool so that they could charge more. It’s no wonder the public jumped on to the apps so quickly. Uber swooped in, provided convenient technology with excited drivers, and offered consumers a great price below what we could ever offer to get hooked. It worked.
But when you think about it, doesn’t that seem silly to throw out an entire industry because some things were broken? Now that local regulators have been alerted—via many of the apps’ lobbyists—about service and other issues, wouldn’t it be more logical to try and fix the existing system? Regulators are fond of saying that preventing Uber from coming to a city is stifling 21st century progress. Now they are willing to listen after years of using our industries for taxes and fees? Luckily, consumers are starting to take notice. Perhaps the biggest argument for public awareness is insurance. It’s common sense that making something that is heavily regulated cheaper is the result of cutting corners. After scanning numerous public comments on Uber articles and on Twitter feeds, it is clear that the public is catching on to the distinction of commercial insurance. Not enough by far, but it’s definitely made an impression. As an aside, it has been suggested that Uber denying the liability for the death of Sofia Liu may actually usher in an unintended consequence as insurers watch the case carefully and potentially could refuse to insure drivers who work solely for apps. With the burden on drivers to purchase these pricey commercial policies, how will it possibly stay profitable for an Uber freelancer?
The bottom line is, you need to educate your customers. These apps aren’t limited to just 20somethings who are out drinking on a weekend—but it is, however, extremely important to capture that demographic as well. Uber is being used by everyday ordinary people and business executives alike (especially for point to point service within cities). Background checks, high insurance coverage, well-maintained vehicles, and expertly trained chauffeurs are the advantages of chauffeured ground transportation.
Kicking It Into High Gear
There’s one side missing in this article: the voice of Uber CEO and founder Travis Kalanick, who declined—well, ignored is the right word—our requests for an interview. It’s OK, we know he’s a busy man. Besides, since he is talking to just about everyone else, his opinions are on the record. His local spokespeople are talking as well. It’s estimated that there are currently over 150 lawsuits pending against Uber, but the biggest by far is the death of Sofia Liu. It’s the one to watch. As a recent headline read: “It’s Travis Kalanick against the world, and lately the world seems to be winning.” Maybe, but be prepared for anything.
The bad news is, Uber is here to stay. In certain cities, you’re going to have to learn to work with and compete with it. Up your game; work smarter and offer more than any app ever could.
During his State of the Industry address at the Chauffeur Driven Show, David Seelinger of EmpireCLS Worldwide Chauffeured Services urged the industry to think of the apps as a positive for our industry. “All this change with Uber and other technological advances is going to do nothing but make us better,” he said. “Don’t look at is a big negative; look at it as an opportunity. There’s some room for great change in our business. The service we provide and how good we do it is our saving grace.”
The good news is, you’re in excellent company and we’re organizing as an industry a little more every day. These apps are the talk of pretty much every limousine association out there. It’s definitely IATR’s top priority. It’s the foremost agenda for new Taxicab, Limousine & Paratransit Association President Robert Werth, who recently penned an editorial in a San Francisco newspaper imploring the public to be vigilant with their comments. In the op-ed, he expressed his concerns about the driver assuming the responsibility solely for insurance and the vast gap between background checks that are required. It’s on the docket of every industry event out there. If you’re not involved, you should be. Even if you see it as fair competition, Uber is attempting to change regulations in many cities that could affect how you operate—or even possibly shut your company out of the market. While we’re attempting to keep you updated on this issue, it’s moving quickly in many areas and some of the information that was accurate at press time has surely been superseded. Associations need your support.
Nationally, operators can support the PASS Act (HR 2596), which was introduced in summer 2013. It’s important to our industry because it attempts to amend title 28, United States Code, to authorize the Attorney General to share information with agencies of state and local governments that conduct criminal background checks when issuing licenses to taxi drivers, chauffeurs, and other public passenger vehicle operators. This would broaden the scope of background checks on those in the transportation industries. Associations like the Limousine Association of New Jersey have thrown its support behind it. Mark Mazza of HUB Insurance raised a very important point about insurance. “If you allow your chauffeurs to take vehicles home at night in order to facilitate work, you should know that they could be using your vehicle for Uber runs,” he says. “If your chauffeur uses that vehicle when accepting Uber-like work and gets into an accident, your insurance company could deny coverage and you would be liable for the damages. The point here is don’t take anything for granted.” Having a clear policy about use of the vehicle, and possibly installing a GPS-type of device to keep tabs on vehicles, can both go a long way in protecting your company. It’s even more complicated for an IC who uses his own vehicle if he works for several different companies and apps.
Daus, who has been nicknamed the “app guy,” says that our industry can do a few things to ensure that we survive and maybe even thrive. “First, make sure your customers are happy and your services are competitive. Hold on to chauffeurs and make sure they are well compensated and happy with their jobs. Finally, get your own app and heavily market it to customers. It’s hard to tell which way this will go—it could destroy transportation as it’s done today or it could make it incredibly more efficient.”
By the way, perhaps we’ve been going about this the wrong way. Maybe we should treat Uber like the technology company it claims to be. Uber requires a credit card in order to use service, so let’s hope that their PCI compliance is up to date. We’d hate to see them fall down on the job like Target.
Where the biggest battles are still brewing
(Keep up to date with our Association Updates every month)
In February, members of the Georgia House introduced Bill 970, which would require app companies to obtain a license and register with the state. In addition, drivers would be required to comply with local regulations governing taxi and limousine companies, including a thorough vetting, licensing, and inspection of vehicles. The same level of insurance would also be required. It’s been met with serious public backlash, so it’s anyone’s guess where this goes.
Uber dominates the conversation at most Maryland Limousine Association (MLA) meetings of late, and together with Violia Transportation and several taxi companies, MLA has formed a coalition to keep up the fight. Like in numerous other cities, Uber filed a petition in Annapolis to have the regulations changed and/or relaxed. This is ongoing.
After September’s ruling by the CPUC, Uber fought back by once again claiming that it should not be subject to transportation regulations because it is a technology company. Likewise, the taxi industry fired back noting that TNCs do not have meters, which could prevent overcharging, plus Uber would not have the burden of workers' compensation like taxi companies have to maintain. In between all this, Sofia Liu was killed and a wrongful death lawsuit was filed against Uber. Greater California Livery Association is keeping abreast of this issue and included it as part of its recent Day on the Hill in Sacramento this past February.
Charlotte Regional Limousine Association is trying to combat all TNCs (Transportation Network Companies) with their Passenger/Vehicle for Hire Board (PVHB), which is managed by the Charlotte Police Department. CRLA and PVHB are jointly attempting to squash all TCNs in the Charlotte area by enforcing the long-standing transportation laws already in place in the state of North Carolina. In mid-February, the Charlotte City Council was expected to hold a meeting to address the issues of safety that the association is raising.
Ridesharing apps like Lyft and UberX are getting the cold shoulder in the Windy City. Chicago Mayor Rahm Emanuel proposed an ordinance in February that requires the apps—which it refers to as Transportation Network Providers (TNPs) to have a city license with an annual fee of $25,000 plus $25 per driver, as well as commercial liability insurance of at least $1 million (taxis are only required to have $350,000 in insurance). The day after, the taxi industry filed a suit against the city alleging that “Chicago has created a discriminatory system for taxi services that favors affluent people, while it also jeopardized public health and safety and exposed the city to billion-dollar potential damages.” At a recent hearing, Lyft rallied nearly 100 people though grassroots efforts to throw their support behind the company. The Illinois Limousine Association (ILA) hasn’t been silent on the matter. ILA is working with legal counsel to see what can be done to enforce the rules equally.
Franci Ouzounis, former president of the Colorado Limousine Association and co-owner of White Dove Limousine, reported last year that she was having difficulties trying to find chauffeurs to work for her company. It probably wasn’t good news then that Colorado Public Utilities Commission balked on a proposed regulatory framework that would have heavily regulated Uber. The commission officially killed the idea last fall. Senate Bill 175 was introduced earlier this year that would place rideshares under state regulatory authority, but the bill is stuck.
A face-off took place in January that allowed Uber and Lyft, as well as taxi and limousine companies to voice their concerns at Dallas City Hall. A task force was developed by the City Council’s Transportation and Trinity River Project Committee, which includes Richard Weiner of Carey Dallas and president of the Dallas Fort Worth Limousine Association. Weiner spoke on behalf of the association, noting that the rules don’t need to be changed, just enforced. The task force was expected to release recommendations at the end of February or early March, which are expected to include vehicle costs, inspection, and age limits.
Uber failed to register as a limo carrier in the state as required and has been non-responsive to a letter sent at the end of 2013. Uber currently requires a driver for its Black service to be a state-licensed chauffeur, but state regulators are kicking up some dust when it comes to UberX. Regulators are concerned about insurance and the fact that ridesharing drivers do not currently carry the expensive commercial auto insurance. The familiar “we’re a technology company” mantra has been batted around in official responses.
With the exception of Jacksonville, Uber, et.al., has yet to establish itself in any of the major Florida cities such as Tampa, Miami, and Orlando. It’s not for a lack of trying. Evan Michaels of Coastal Car Worldwide (Ft. Lauderdale) says, “Miami didn’t say that [Uber] couldn’t operate here, but that it would have to be properly permitted in order to do so. Knowing that there are a limited number in the county, it meant they would have to work with one of the permitted companies and follow the legislation the way that it’s written. So that’s how they’ve been kept out.” He along with Neil Goodman of Aventura Worldwide Transportation Services (Aventura) and Rick Versace of A1A Airport & Limousine Service (Boca Raton) are among some of the biggest players in the area spearheading the fight. The first step was to unite with the taxi companies, and Uber temporarily pulled out. The war, however, is far from won as Uber heads to Tallahassee to try and fight it on a state level. The theory is that Uber will successfully persuade the state to overturn the black car model, which calls for prearranged service, and squeeze in that way. Versace, also president of the Florida Limousine Association, is working with the South Florida Limousine Association and they have hired a lobbyist. Developing.
UberX and Lyft just recently started its promotional period in the city, where it offers free rides. After a late February council meeting, UberX and Lyft were warned that drivers would be charged with violating city ordinances if they accepted money or donations as they have not been cleared to operate legally in Houston. Uber Black will debut if the company gets its way to change the current regulations that require 30 minutes advance notice and a minimum of $70. The Uber team has been actively recruiting chauffeurs so that it has a groundswell of support when it meets with the city council. Joe Jordan of Jordan Limousines has testified at hearings and is the area’s most vocal opponent. Two organizations—Houston Area Livery & Charter Association and Jordan’s Houston Limousine Operators Networking Group—are on the frontlines.
Guess what debuted in mid-February in Brew City? If you said Uber Black, you’d be correct. On the same day it launched, Milwaukee City Clerk Jim Owczarski said Uber has “made it crystal clear [it has] no intentions of complying with those rules and regulations,” regarding filing for proper permits. Uber fired back that it is operating legally and within the confines of the current laws. The Wisconsin Limousine Association is watching this situation very closely, but is currently taking a "wait and see" approach before deciding on the appropriate action, according to President Mike Hartmann of Stardust Limousine. Developing.
Uber came roaring in to Music City this past January after the Metro Council amended the transportation ordinance, eliminating the $45 minimum trip charge and 30-minute wait period. Since then, UberX and Lyft have been also doing business in the city, with UberX slashing rates in order to try and shut out the competition.
Charles Cotton, owner of VIP Transportation and president of the loosely organized Oklahoma Limousine Association, is leading the charge in OKC. The state senate recently introduced SB 1703, which would redefine “ridesharing” to essentially usher in Uber. According to Cotton, it would gut industry regulations that would leave consumers unprotected. Cotton is currently rounding up supporters and working to lobby against the bill.
In what’s been called the toughest regulations in the nation, Seattle officials are weighing a measure that would restrict the ridesharing apps significantly. Uber Black drivers are already regulated like limousine companies in the state, but Seattle proposed a cap of 300 drivers among the three ridesharing companies (100 each). Further, drivers would be capped at 16 hours per week and would be required to have $1 million in insurance (proposal information was current as of press time, but has likely been negotiated). UberX has been the loudest critic of the proposal, and all of the ridesharing companies have refused to accurately divulge the number of drivers it has in the city. The council postponed a vote that was scheduled for mid-February amongst the public backlash. Right now it’s a stalemate as none of the parties are happy with the proposal. [CD03.14]