The rise of Uber and other ridesharing services shined a light on how the taxicab industry has created artificial barriers to entry into the market. Those barriers to entry were the focus of two court cases heard by the 7th Circuit Court of Appeals on Monday. One case challenged Milwaukee’s repeal of the cap on taxi permits, and the other challenged Chicago’s decision to recognize ridesharing services. In both cases, transportation entrepreneurs teamed up with the Institute for Justice to fight for their right to compete with the formerly-protected cab companies.
During the hearing for the Chicago case, Judge Richard Posner asked Michael Shakman, attorney for Chicago’s taxis, a dozen times whether or not the attorney would favor deregulation of the taxi industry. The city’s attorney at first said, “[The city] can say to Uber ‘you need a chauffeur’s license’ or it can say to all taxis ‘you don’t need a chauffeur’s license.’” When asked once more which option he would prefer the attorney said, “The taxi industry would greatly prefer the latter, to be free of the chauffeur’s license.” When Judge Ponser then encouraged him to get the city to deregulate taxis, Shakman tried to sit down claiming his time was up.
In 2014, Chicago’s taxicab industry challenged a Chicago ordinance which recognized ridesharing services like Uber and allow them to compete with taxicabs. Ridesharing drivers joined with the Institute for Justice to intervene in the lawsuit and defend the ordinance.
Milwaukee was in a similar situation to Chicago. In 2014, prompted by previous successful litigation by the Institute for Justice, Milwaukee abolished its cap on the number of available taxi permits. It also allowed ridesharing companies, like Uber, to compete with taxis for riders. In response, the former taxi cartel sued the city.
Judge Posner compared the situation in Milwaukee to the rise of automobiles a century ago, “When motorized taxis came to New York in 1900 what do you think it did to the horse and buggy taxis?” He continued to criticize the city’s arguments. “It’s really creating a cartel isn’t it?” said Judge Posner. “Ordinarily you can have new entrants into the market to compete with existing suppliers of whatever service is involved.”
Judges for both cases did not say when a decision would be reached.
To listen to the hearing for the Milwaukee case click here: http://media.ca7.uscourts.gov/sound/external/nr.16-1008.16-1008_09_19_2016.mp3
To listen to the hearing for the Chicago case click here: http://media.ca7.uscourts.gov/sound/external/nr.16-2009.16-2009_09_19_2016.mp3