Taxi Companies Cannot Block Competition, but They Could Compete

Taxi companies that have been trying to limit competition from ridesharing services are being presented with a much better alternative. As it turns out, deregulating the traditional cabs is a more effective (and constitutional) way to compete with increasingly popular ridesharing names like Uber and Lyft.

The taxi companies have made it clear that being subject to a maze of bureaucracy is one of the disadvantages they face compared to ridesharing services. So why should cities not help level the playing field?

When Chicago taxi companies first saw the oncoming threat of competition from ridesharing services, they went to court and demanded that the city’s taxi regulations be solidified in order to maintain an economic stranglehold on their preferred business model. Three ridesharing drivers joined forces with the Institute for Justice (IJ) and intervened in an effort to thwart the taxi companies’ unconstitutional lawsuit.

Last Monday, the case was heard before the 7th U.S. Circuit Court of Appeals.  Judge Richard Posner repeatedly asked the taxi companies’ attorney why simply deregulating the taxis, instead of imposing burdensome new regulations on others, would not be satisfactory. The taxi companies’ attorney could not give a clear answer, saying “It’s not a yes-or-no question,” and that “The city can go either way.” The Judge did not seem persuaded.

“Well, that’s a good project for you,” Judge Posner said. “Get the city to deregulate taxis.”

IJ Senior Attorney Anthony Sanders, who represented the ridesharing drivers, added:

“There are serious questions about shackling taxi cabs to regulation, but the solution is not to shackle them on drivers like my clients. The solution deregulation of the taxi cabs.”

Meanwhile, some other cities’ taxi industries are coming to the realization that making regulations more navigable might help the taxis compete with ridesharing. In Cambridge, Mass., the taxi companies have asked the city to ease the rules on traditional cabs so they can compete with the relatively streamlined process enjoyed by companies like Uber.

Other cities have paved the way for what could be a new wave of competitive taxis and ridesharing services improved by a lighter regulatory burden. Last year, Sarasota, Fl., deregulated their taxi industry after an effort to impose new rules on Uber failed. Elsewhere, court decisions have resulted in caps being lifted on the number of taxi drivers who can work in a given area.

Cab companies just need to realize that increasing competition, and not challenging it, is the way to improve their situation.

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