Green Cab’s Story: Twenty-First Century Innovation Shut Out by Twentieth-Century Regulation

Green Cab’s story began in Athens, home of Ohio University. Longtime Ohio entrepreneur John Rinaldi had a vision to start a novel type of taxi service in this vibrant college town. Like many small cities across America, Athens lacked much in the way of on-demand taxi service but remained untouched by modern ridesharing companies like Uber and Lyft because of its size. As an Ohio University graduate and proud resident of Athens, John recognized a need for greater transportation options in the city and developed a simple business plan: To offer safe, reliable and affordable rides to his community.

Green Cab offers two important twists on the usual taxi-company model, one technological and one personal. First, using technology and his experience working in the airline industry, John implemented a computerized dispatch system to efficiently manage Green Cab’s drivers and customers. Rather than employing a single human dispatcher, John’s system allows customers to be instantly matched with an available driver and allows Green Cab to monitor exactly how much demand there is in the community at any given point. Predictably for a college town, Green Cab’s demand spikes on Thursday, Friday, and Saturday nights—and John is able to make sure he has drivers on hand to seamlessly deal with the increased call volume.

Green Cab’s other innovation, though, is its people: Most transportation companies either require drivers to own their own vehicles or charge drivers hefty fees to lease permitted vehicles from the company. Green Cab does neither. Instead, Green Cab owns and maintains all its vehicles, while drivers pay a nominal fee for using the car and simply split their fares with the company. (Drivers, however, keep all their own tips.) As a result, Green Cab has recruited a crew of drivers different from stereotypical taxi drivers, with a large number of young people and more female drivers than your typical taxi company.

What John did not realize, though, was that Green Cab’s success was also based on a third twist: It just so happens that John lived in a city where anyone who wants to start a taxi company can do so. ¹

This means that when John wanted to start his taxi business in Athens, he could. And his business took off.

This regulatory quirk became clear as soon as John attempted to expand Green Cab’s services to similar college towns, starting with Bowling Green, Ohio. When Green Cab’s manager Chris Meek tried to turn in an application for a taxi permit in Bowling Green, city officials openly laughed at him. This is when John first learned of the city’s taxicab cap. After weeks of cooperating with city officials in an attempt to obtain a permit, the city formally denied Green Cab’s application.

Bowling Green Isn’t Protecting Public Safety. It’s Protecting Itself from Competition

The problem in Bowling Green had nothing to do with Green Cab’s cars or drivers or insurance. Green Cab was shut out because its business model would not fit the city: In fact, Bowling Green, home to Bowling Green State University, ²

is remarkably similar to Athens. The problem in Bowling Green was simply that the city forbids new taxi businesses—period.

The city of Bowling Green only permits one taxicab per 2,000 people. In a town of just over 30,000 people, that’s only 16 taxicabs for the entire city. This number may seem small on its face, but it’s actually even smaller. Of the 16 available permits, the government holds seven and uses these permits to run a government-operated public transit service called B.G. Transit.

But B.G. Transit is not a taxi service—it is a shuttle service that runs on a pre-scheduled route. Rides can only be scheduled at least one hour in advance, and passengers must be willing to wait up to thirty minutes for a ride. And B.G. Transit does not run on weeknights after 8:00 p.m., on Saturdays after 4:00 p.m. or on Sundays—which is exactly when, based on its experience in Athens, Green Cab has learned taxis are most needed. ³

The city has granted the remaining nine permits exclusively to two taxi companies. Yet these companies do not offer a real taxi service either. One company only runs a “share-a-ride” service, grouping customers on a location-to-location basis in large 12-person vans. ⁴

 The other company similarly offers a shuttle service using large vans. ⁵

In short, Bowling Green’s taxicab cap has created a near prohibition on taxi services in the city. Instead of protecting public safety, Bowling Green has arbitrarily reduced transportation options to protect itself and certain entrenched taxi businesses from competition at the public’s expense. The result is a city with no options for modern transportation, which is exactly what Green Cab wants to bring to Bowling Green.

Let Consumers and Entrepreneurs, Not City Bureaucrats, Decide

Green Cab’s success in Athens is a prime example of what can happen when the government simply lets consumers and entrepreneurs decide how many taxis a city needs. Since Green Cab began operating in Athens, the company has seen an increased demand for taxis in the city. Ohio University students now count on the taxis for safe rides, especially on nights and weekends. Other taxi businesses have also benefitted from this increased demand. In Athens, more people are using taxis now than ever before. That’s good for the public and entrepreneurs.

Since the early 20th century, cities across America have clamped down on taxi entrepreneurship by limiting the number of available permits. But even as governments have modernized industry after industry, taxi regulation in many places has lagged behind the curve. Experience shows that this is a mistake. Time and time again, when cities lift taxicab caps, the public benefits from greater transportation options, and entrepreneurs benefit from the opportunity to achieve the American Dream. In Athens, for example, increased competition has led to innovative transportation options like Green Cab.

Similar benefits have also been seen in cities like Minneapolis and Milwaukee. For example, when the city of Minneapolis lifted its long-standing cap of 343 taxi permits after a lawsuit led by IJ, the number of cabs in the city nearly tripled. ⁶

Milwaukee removed a similar cap after a lengthy legal battle led by IJ, allowing for freedom of choice for consumers and greater opportunity for entrepreneurs.

In short, Bowling Green’s protectionist cap strips consumers of the benefits of a free transportation market and deprives entrepreneurs of the right to pursue the occupation of their choice.

The Ohio Constitution Protects the Right to Earn an Honest Living

Ohioans have a constitutional right to economic liberty. The Ohio Constitution protects the right to earn an honest living free from unreasonable government regulation. Ohio courts have long recognized that a law that interferes with this right is unconstitutional if it does not have a real and substantial relationship to public health, safety or welfare. ⁷

In this lawsuit, Green Cab asserts that Bowling Green’s taxicab cap violates state constitutional protections of due process and equal protection. ⁸

Green Cab’s protectionist law is not designed to protect the public. Instead, the cap achieves the opposite: It reduces the availability of safe and affordable rides while arbitrarily limiting opportunity for entrepreneurs like John and Green Cab’s drivers to earn a living. Simply put, Bowling Green’s protectionist law does not have any relationship to public health, safety or welfare.

This case has been filed in state court under the Ohio Constitution. In filing this case, IJ and Green Cab seek to solidify the Ohio Constitution’s protection for economic liberty and to stand up for the rights of all Ohioans to pursue the occupation of their choice, free from unreasonable and arbitrary regulation.

Litigation Team

The litigation team in this case consists of IJ Senior Attorney Robert McNamara and Attorney Meagan Forbes of IJ’s Minnesota Office. Joining IJ as local counsel is longtime Ohio litigator Andrew Mayle, of the firm Mayle, Ray & Mayle.

Institute for Justice: The Nation’s Leading Advocates for Transportation Freedom

IJ litigates cases in support of the right to earn an honest living free from unreasonable government interference. Founded in 1991, IJ has successfully defeated barriers to entry in transportation markets across America, defending the constitutional rights of entrepreneurs against irrational, arbitrary and anticompetitive government regulation and increasing transportation options for consumers. Some of IJ’s important transportation victories include:

• Ghaleb Ibrahim v. City of Milwaukee—In 2013, IJ defeated Milwaukee’s entrenched taxi cartel, lifting the city’s taxicab cap and freeing the market for all taxi entrepreneurs to earn an honest living.
• Minneapolis Taxi Owners Coalition, Inc. v. City of Minneapolis—In 2007, IJ successfully defended the City of Minneapolis’s free-market taxi reforms that restored freedom of choice to consumers and opened the market for entrepreneurs.
• Clutter v. State of Nevada—In 2001, IJ defeated the Nevada’s Transportation Services Authority’s onerous and arbitrary limousine licensing procedures, breaking up its state-enforced limousine cartel that had stifled competition in the Las Vegas limousine market.
• Ricketts v. City of New York—In 1999, IJ protected the constitutional rights of commuter van entrepreneurs in a fight against the government bus monopoly, which would not allow jitney entrepreneurs to provide service to consumers in underserved neighborhoods in New York City.
• Jones v. Temmer—In 1995, IJ helped a group of entrepreneurs fight Colorado’s taxicab monopoly, allowing them to open Denver’s first new cab company in nearly 50 years. This victory helped break open government-sanctioned taxicab monopolies in Indianapolis and Cincinnati.

For more information, please contact:

J. Justin Wilson
Director of Communications
Institute for Justice
901 N. Glebe Road, Suite 900
Arlington, VA 22203
(703) 682-9320 ext. 206
jwilson@ij.org