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

Legal Issues

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.

Filed Under: new york, nyc, ride sharing, tlc
Companies: lyft, uber