from the that's-not-how-this-works dept
It’s no secret that cab companies and many cab drivers don’t much like Uber and Lyft. Competition is tough. And cabs in most cities have survived thanks to artificial limits on competition through medallions and the like. This has always been a stupid, and frequently corrupt, system. For years, before Uber and Lyft came along, people talked about the ridiculousness of artificially limiting competition in this manner, but it was only once those companies came along that the true ridiculousness was made clear. While some forward looking cabbies have embraced these and similar systems, others have been fighting the new reality, often in fairly ridiculous ways. In Milwaukee and Chicago, cab companies sued those cities, arguing that allowing this type of competition amounted to a Fifth Amendment violation, in the form of “taking private property for public use without just compensation.” What private property, you might ask? Well, according to the cab companies, the artificially restricted competition is their property. No, really.
The district courts didn’t buy it, and now that it’s moved up to the 7th Circuit appeals court, Judge Richard Posner isn’t buying it either. In the two decisions — Joe Sanfelipo Cabs v. City of Milwaukee and Illinois Transportation Trade Association v. Chicago, Posner makes quick work of explaining to these folks that the government restricting competition from entering your market isn’t a property right that those who benefit from it get to make claims over (though he does, unfortunately, say that patents are a form of property in dismissing the “absurd” claims from the cabbies):
The plaintiffs? contention that the increased number of
permits has taken property away from the plaintiffs without
compensation, in violation of the constitutional protection of
property, borders on the absurd. Property can take a variety
of forms, some of them intangible, such as patents. But a taxi
permit confers only a right to operate a taxicab (a right
which, in Milwaukee, may be sold). It does not create a right
to be an oligopolist, and thus confers no right to exclude
others from operating taxis.
Posner notes that if there had been an explicit promise not to change regulations, that might have been one thing, but there was not. Similarly, he admits that the taxi permits are property, but that’s unrelated to the issuing of more permits:
The taxi permits issued by the Milwaukee city
government are property, but have not been ?taken,? as they
do not confer on the holders a property right in, amounting
to control over, all transportation by taxis and taxi substitutes
(such as Uber) in Milwaukee.
And then he basically says “welcome to a market economy, cabbies”:
Undoubtedly by freeing up entry into the taxi business
the new ordinance will reduce the revenues of individual
taxicab companies; that is simply the normal consequence of
replacing a cartelized with a competitive market. But the
plaintiffs exaggerate when they predict ruination for themselves.
Buses and subways and livery services and other taxi
substitutes have not destroyed the taxi business; nor has Uber
or Lyft or the private automobile or for that matter the bicycle.
Taxicabs will not go the way of the horse and buggy?
at least for some time.
That’s from the case against Milwaukee. The Chicago ruling is pretty similar:
All seven of the plaintiffs? claims are weak. The first is
that allowing the TNPs into the taxi and livery markets has
taken away the plaintiffs? property for a public use without
compensating them. A variant of such a claim would have
merit had the City confiscated taxi medallions, which are the
licenses that authorize the use of an automobile as a taxi.
Confiscation of the medallions would amount to confiscation
of the taxis: no medallion, no right to own a taxi, …
though the company might be able to convert the vehicle to
another use. Anyway the City is not confiscating any taxi
medallions; it is merely exposing the taxicab companies to
new competition?competition from Uber and the other
?Property? does not include a right to be free from competition.
A license to operate a coffee shop doesn?t authorize
the licensee to enjoin a tea shop from opening. When property
consists of a license to operate in a market in a particular
way, it does not carry with it a right to be free from competition
in that market.
Posner doubles down on just how dumb this argument is by the cab companies:
Taxi medallions authorize the owners to own and operate
taxis, not to exclude competing transportation services.
The plaintiffs in this case cannot exclude competition from
buses or trains or bicycles or liveries or chartered sightseeing
vehicles or jitney buses or walking; indeed they cannot
exclude competition from taxicab newcomers, for the
City has reserved the right (which the plaintiffs don?t challenge)
to issue additional tax medallions. Why then should
the plaintiffs be allowed to exclude competition from Uber?
To this question they offer no answer.
All that the City gives taxi?medallion owners is the right
to operate taxicabs in Chicago…. That isn?t a right to exclude competitive providers
Perhaps more importantly, though, Posner also shoots down the argument that it’s unfair that Uber gets to operate under a different regulatory regime:
The plaintiffs argue that the City has discriminated
against them by failing to subject Uber and the other TNPs
to the same rules about licensing and fares (remember that
taxi fares are set by the City) that the taxi ordinance subjects
the plaintiffs to. That is an anticompetitive argument. Its
premise is that every new entrant into a market should be
forced to comply with every regulation applicable to incumbents
in the market with whom the new entrant will be
Here?s an analogy: Most cities and towns require dogs
but not cats to be licensed. There are differences between the
animals. Dogs on average are bigger, stronger, and more aggressive
than cats, are feared by more people, can give people
serious bites, and make a lot of noise outdoors, barking
and howling. Feral cats generally are innocuous, and many
pet cats are confined indoors. Dog owners, other than those
who own cats as well, would like cats to have to be licensed,
but do not argue that the failure of government to require
that the ?competing? animal be licensed deprives the dog
owners of a constitutionally protected property right, or alternatively
that it subjects them to unconstitutional discrimination.
The plaintiffs in the present case have no stronger
argument for requiring that Uber and the other TNPs be
subjected to the same licensure scheme as the taxi owners.
Just as some people prefer cats to dogs, some people prefer
Uber to Yellow Cab, Flash Cab, Checker Cab, et al. They prefer
one business model to another. The City wants to encourage this competition, rather than stifle it as urged by the
plaintiffs, who are taxi owners.
There are enough differences between taxi service and
TNP service to justify different regulatory schemes, and the
existence of such justification dissolves the plaintiffs? equal
protection claim. Different products or services do not as a
matter of constitutional law, and indeed of common sense,
always require identical regulatory rules…. If all consumers thought the services
were identical and that there was therefore no advantage
to having a choice between them, TNPs could never
have gotten established in Chicago.
There are all sorts of arguments people can make about whether or not companies like Uber and Lyft are good (and I’m a fan of them), but arguing that they’re “taking property” away from cab medallion holders is not a legitimate argument.
Filed Under: car hailing, chicago, competition, medallions, milwaukee, property, property rights, richard posner, ride sharing, taxis