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Virginia Joins the Pyrrhic War on Uber

Jared Meyer | 06/06/2014 |
Virginia's Pyrrhic War On Uber

Getting around Northern Virginia is about to get more expensive, and far less convenient. Why? Because Virginia’s Department of Motor Vehicles sent cease and desist orders to popular ridesharing services Uber and Lyft on Thursday. 

These letters were not sent in the interest of public safety nor of Virginia’s residents. Instead, they were sent because Virginia wants to protect entrenched interests (existing cab companies). It refuses to allow Virginia travelers to reap the benefits of new technology.  

Virginia claims that Uber and Lyft cannot continue operating as taxi companies since they have not received permission from the government to do so. Just one problem—Uber and Lyft are not taxi companies. 

Uber and other ridesharing services do not own the cars their drivers use. They provide the technological platform and support to connect drivers and riders. Virginia refuses to recognize this, even though over 125 cities worldwide allow consumers and drivers to embrace the benefits of ridesharing services.

Applying regulatory standards that were codified before the Internet is no way to foster economic growth. Attempting to apply these regulations to ridesharing companies is similar to trying to jam a square peg into a round hole. Passing one-size-fits-all, protectionist regulations is precisely what triggered problems in the taxi market and encouraged the rise of ridesharing companies in the first place. 

Justin Kintz, Uber’s head of public policy for the Americas, told me, “The Commonwealth’s DMV is taking steps to protect special interests, such as taxi companies, that see Uber X as a competitor. I am puzzled by the DMV’s dramatic overreaction.”

Uber also released a statement saying, “Uber has been providing Virginians with safe, affordable and reliable transportation options, so the DMV’s actions today are shocking and unexpected. We have been working in good faith with the DMV to create a regulatory framework that allows for modern business models like ridesharing. This decision is not in the best interest of Uber partners, who have been using the technology to make a living, create new jobs and contribute to the economy—or [of] residents who rely on Uber for access to affordable, reliable transportation alternatives.”

Ridesharing companies already voluntarily require background checks, insurance requirements, zero-tolerance policies on drugs and alcohol, and vehicle safety inspections. Uber X offers three times the insurance coverage Virginia mandates for taxis, and Uber drivers are required to pass thorough background checks—a requirement the Commonwealth does not impose. Virginia’s primary concern does not seem to be public safety.

The companies faced similar mistreatment from the District of Columbia Transportation Commission in late April. Again, it was the interests of taxi companies, not consumers and drivers, that were being protected.

It is not that regulators have bad intentions—for the most part they take their responsibilities to the public seriously. However, regulated industries spawn special interest groups that use government enforcement to protect their profits at the expense of consumers by keeping out innovative competitors. When the critical aspect of competition is missing from markets, innovation suffers and prices rise. 

D.C. Councilmembers David Grosso and Mary Cheh recently introduced a bill that clarifies how ridesharing companies work, ensures safe practices continue, and limits DCTC’s authority. Virginia should follow this example and pursue smarter regulation that is not beholden to the special interests of the existing taxi industry.  

What Uber and Lyft have in common is the benefits they offer to drivers and consumers. Their drivers enjoy convenience and flexibility, and consumers benefit from lower prices and increased choice. 

Many consumers prefer these companies, because travelers realize that they offer rides in cleaner cars, with friendlier drivers, and at far lower prices than taxi companies.

The motivations of the Commonwealth and others who seek to shut down ridesharing services are clear—to protect the profits of existing taxi drivers. This is not a suitable justification to limit consumers’ freedom to choose from a variety of options. New technology drives a stream of new services, such as WhatsApp, Airbnb, Twitter, and Instagram, and ridesharing is only one example. If entrenched interests are allowed to defeat innovation, everyone else will lose.

 

Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

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