Lyft Announces NYC Launch, Taxi Commission Declares It Illegal Hours Later

from the don't-mess-with-our-taxi-medallions dept

While Uber gets much of the attention in the ride-sharing space, many people I know in San Francisco swear by Lyft instead. Lyft has the reputation of being the more laid back, friendlier version of Uber. Rather than Uber’s infamous “surge pricing,” Lyft has happy hour discounts. Rather than the sleek corporate feel of Uber, Lyft is famous for drivers putting giant pink mustaches on their cars, encouraging passengers to sit up front… and to give drivers a good old fashioned fist bump. While Uber has been available in New York City for some time, Lyft took its time, finally announcing plans to open up in NYC on Friday (well, Brooklyn and Queens, initially, staying away from taxi central Manhattan).

Not surprisingly, the NYC Taxi and Limousine Commission was not pleased with this. While Lyft says it’s tried to work with the TLC, the TLC disagrees, noting that Lyft agreed to a single meeting that just happened this week.

So, of course, it’s not surprising that, within a day, the TLC officially declared Lyft an “unauthorized service” in NYC, meaning that it may start cracking down — something NYC did last year to the other top competitor in the space, Sidecar. Lyft says it’s still planning to launch, insisting that it doesn’t believe the rules the TLC are citing apply to it. Basically “come at us, TLC!”

The TLC insists that it wants Lyft to be able to operate in New York City, even saying that it’s willing to change some of its rules, but bureaucracies — especially those with close ties to highly regulated industries that have a history of keeping out competition — don’t tend to move very fast. As we’ve noted before, cities that quickly ban these kinds of services are basically advertising themselves as places not friendly to innovation and/or run by corrupt officials.

For all the arguments about how these services don’t meet the “stringent” requirements for existing taxi regulations, almost everyone I know prefers using services like Lyft and Uber over traditional cab services. They’re much more convenient and personally I’ve found the service to be significantly better overall. Part of the problem is that the regulations were built for a different time, when there was significant information asymmetry between a rider and a driver, allowing drivers to take advantage of riders. But, these kinds of services actually flip that equation: they provide much greater information to the rider, and even give them a big say in passing on similar information to others, in the form of ratings. Thus, there are natural incentives to provide a better overall service, making many of the purposes of existing regulations stale and obsolete.

But, of course, as often happens in highly regulated industries, those who already made it through the hurdles like those regulations because they limit competition, and allow prices to be higher due to scarcity. It also gives them less incentive to provide better services. Thus, you get into a world of regulatory capture, where things are worse for everyone. While, yes, the “intentions” of these regulations may be good, the reality is that the information exchange enabled by technology makes many of the regulations obsolete. A slow-moving bureaucracy (especially one dealing with regulatory capture) isn’t going to move very fast, but that’s harmful for overall innovation in the space and setting up the best conditions for citizens of NYC, who probably prefer a better overall experience in getting around.

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Companies: lyft, uber

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Comments on “Lyft Announces NYC Launch, Taxi Commission Declares It Illegal Hours Later”

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30 Comments
kryptonianjorel (profile) says:

Re: Re: Re:

Lyft has a very good hiring process. For a driver to be approved, he or she must meet with a current, senior driver called a mentor. This mentor takes an hour or so explaining the way Lyft works, and taking a test ride with the driver. If he or she can’t drive, communicate, navigate, or any number of other things, he or she isn’t approved. When a driver is ready for this mentoring, the app processes their DMV record. Afterwards, if they are approved, Lyft performs a criminal background check. These checks are done quarterly, so we always know we have safe, reliable drivers on the road

Mike Masnick (profile) says:

Re: Re:

At the risk of sounding anti-innovation, those ‘stringent’ rules are often in place because Extremely Bad Things happen without them. Are Uber and Lyft doing criminal background checks on their drivers, and requiring proof they’re insured to carry paying customers and their vehicle is roadworthy?

And, actually, more to the point, most of those “Extremely Bad Things” happen only when there’s information asymmetry — when companies can get away with it. Both Lyft and Uber have been pretty upfront about the background checks/safety precautions and how they quickly kick out bad drivers. The regulations were put in place because there weren’t independent incentives to keep those offerings safe — but with those guys there are.

Anonymous Coward says:

Re: Re: Re:2 Re:

Obviously. Nonetheless, when one orders a car one doesn’t want a 50/50 chance of getting a trash lyft nor anything that’s short of 99% reliability.

Also, it’s clear from the website that what lyft is advertising isn’t a “limo service” nor a “taxi service”. Based on the “stories” it’s more about community / drivers helping those in need.

They aren’t a “taxi / car service” similarly to Uber. They’re merely a PR firm that tries to be another middle man in the car industry it feels.

Anonymous Coward says:

Re: Re:

The problem isn’t the existence of consumer protection and safety regulations. If it’s just a matter that competitors have to follow those same regulations then I don’t see that as much of a problem. The problem is that the law forbids competition and requires medallions to operate and the number of medallions are artificially and arbitrarily kept limited. The number of taxicab drivers is artificially kept below a certain number period. This has nothing to do with safety and consumer protection or the fact that incumbents need to pass some test (a test that everyone else can also pass and receive a license for passing). There aren’t a set of standards and tests that anyone can meet/pass and receive a license since the number of available licenses is artificially limited.

orbitalinsertion (profile) says:

Re: Re:

A lot of those regulations are in place because certain types of transportation companies would behave improperly in an organized fashion without them. Not just by being lax, but by actively seeking to behave unethically.

Non-monolithic networks require different regulations. And maybe some of those current regulations on taxi/limo services should be changed if it benefits everyone. But what you have here is a regulatory body acting as a monopoly/oligopoly-enforcement organization. The regulated frequently co-opt the regulation to their own ends, even if they have to bow to some regulation as well (or not, as the case may be).

charliebrown (profile) says:

Taxi Services

It strikes me that taxi owners are upset because they think Lyft and Uber, etc, are competing taxi services. They are not taxi services. They are carpooling services. Now there are a lot of similarities, obviously, but one is a taxi service and the other is not. For example, if you need a taxi now, you can get a taxi sent to you now. You can’t do that with Uber or Lyft, etc. Their service can only be pre-arranged, often days in advance, not minutes in advance. They are different things.

Anonymous Coward says:

Medicaid Cabs

Search – lawsuit + yellow + cab + insurance + medicaid

This shows that there are problems with cabs being insured.

One of the search results is titled the following:
“Taxpayer-funded cab rides draw 100s of complaints”

Some of the transportation companies used for medicaid runs are limos. Why are taxpayers paying for limos to take people to the doctor?

Christenson says:

Fix an information assymmetry for us

Hey Mike:
Just a friendly thought: What are some of those ridiculous, but now obsoleter TLC regulations???

Oh, and to anyone thinking of being a libertarian: The absence of government works as long as everyone is equal. Throw a Microsoft into the mix, and you get a nice dystopia with an effective, unelected government…which is why some rich people support it. And yes, quis quotidies ipsos quotidies? I don’t know, but I think required sharing of information might be the right answer. That wasn’t available when the aphorism was first written down!

ChrisB (profile) says:

Re: Fix an information assymmetry for us

We will always need some form of collective. Just not a highly regulated centralized government. Most people read consumer reports before they buy a car. If the government was gone, other groups would independently do safety testing.

Look, Ebay functions perfectly fine without government. In fact, large companies are weaker without government. They can’t bend regulators to stop startups. And consumers voting with their wallets is in fact much more democratic than political elections, where you change the head on a huge machine.

Christenson says:

An old idea, but still worth thinking about

When cameraphones became common, I noted that the security situation with hitchiking changed dramatically…both the driver and the passenger could send pictures of each other to each other’s accounts, pretty much guaranteeing that if anything bad happened, the cops would have a nices photo of the perp and any license plates involved.

But we still seem to need that official imprimatur to relax off the paranoia — we won’t leave it to amateurs!

Ed (profile) says:

As a user of these services (I don’t own a car), I welcome Lyft and Uber to the scene. I’ve given incumbent taxi services a fair chance, I’ve even tried the new app Hailo (which uses incumbent taxis). But, the taxis continue to overcharge, are late or never show up, and some are downright hostile. UberX tends to be a bit pricier but is extremely reliable (you know you’re going to get a much newer car and very professional service) and Lyft has lower prices and a more “friend giving you a lift home” attitude. Uber Black is the towncar/limo service and has proven to be exceptional, and priced very competitively. I will never go back to using taxis again. They had their chance to compete fairly for my money but they blew it.

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