Topic: Regulatory Studies

Can Taxis Survive the Rise of Ridesharing?

If taxi drivers want to endear themselves to consumers, they had better find another way of protesting ridesharing companies than deliberately congesting traffic. On Monday night, taxi drivers with the San Francisco Taxi Workers Alliance caused traffic jams at San Francisco International Airport in the wake of last month’s news that the airport would allow rideshare vehicles to pick up passengers as part of a pilot program. Unsurprisingly, airport visitors were not pleased. This kind of protest has a track record of failure, and in the coming years these protests may be remembered as being among the most frantic and ultimately unsuccessful attempts taxi drivers made to combat the rise of ridesharing companies such as Uber, Lyft, and Sidecar. 

Taxis have deliberately congested traffic in rideshare protests not only in American cities such as San Francisco and Washington, D.C., but also in London, where the protest earlier this year reportedly resulted in an explosion in British Uber sign-ups. In Washington, D.C., the city council passed a rideshare bill in a 12-1 vote despite the protest.

Taxi drivers are right to be worried about ridesharing. In San Francisco, there has been a dramatic drop in the number of taxi trips since the beginning of 2012, the year Uber’s ridesharing service and Lyft both launched. In September 2014, the general manager of a Washington, D.C., cab company said “what we are seeing is, year over year, an approximately 30 percent decrease in business.” A draft study from the Virginia Department of Motor Vehicles reportedly predicts that once rideshare regulations are permanently in place in the state, rideshare drivers will outnumber taxis.

Many consumers have demonstrated over the last few years that they prefer rideshare services to taxis. Market incumbents such as taxis have a number of options when competitors arrive on the scene, but it is hard to see if any will halt the growth of ridesharing. 

Taxi companies could try to innovate to keep up with the technology used by Uber, Lyft, and Sidecar. What many people like about ridesharing is the ease of use. All users have to do is press a button on their smartphone in order to get a ride that is paid for automatically without cash. Hailo, a company with an app similar to the apps offered by ridesharing companies, provides a way for passengers to hail a taxi via smartphones. However, Hailo recently announced that it would be leaving North America because of the competition from Uber and Lyft. Given that anyone who can download a taxi app also has the ability to download a ridesharing app, it is hard to see what a taxicab app would be able to offer that ridesharing companies don’t already provide. Of course, it is not inconceivable that the taxi industry will develop a competitive app, but it will be difficult for that app to succeed considering that rideshare companies already enjoy name recognition as well as a loyal customer base.

Today in Cato’s Growth Forum

Cato’s special online forum on reviving growth continues today with the following new essays:

1. Morris Kleiner makes the case against occupational licensing.

2. Tim Kane calls for more immigration.

3. Alan Viard advocates moving to a progressive consumption tax.

4. Donald Marron argues for a carbon-corporate tax swap.

New in Cato’s Online Growth Forum

Here are the newest essays in the Cato Institute’s online forum on reviving growth:

1. Ramesh Ponnuru offers three ideas – on taxes, patents, and money.

2. William Gale argues for getting our fiscal house in order.

3. Jeff Miron proposes cuts in health insurance subsidies.

4. Adam Thierer calls for a culture of permissionless innovation.

New Essays in Cato Online Forum on Growth

Here are the latest entries in the Cato Institute’s online forum on reviving growth (see here for some more background about the forum):

1. Tyler Cowen contends that foreign policy can have a major impact on long-term growth.

2. Heather Boushey argues that a national program of paid family leave will boost labor supply and therefore growth.

3. Eli Dourado proposes incentive pay for Congress.

4. Peter Van Doren cautions that there are no easy answers.

Today in Cato’s Online Forum on Growth

The Cato Institute’s special online forum on reviving growth (see here for more details) continues today with the following four essays:

1. Dean Baker argues for free trade in doctors and drugs – by eliminating immigration restrictions and patent protection.

2. Jim Manzi also calls for more high-skill immigration, as well as visionary investments in scientific research and technology projects.

3. Jonathan Rauch proposes a national apprenticeship system.

4. Philip K. Howard makes the case for radical simplification of law.

Supreme Court Should Remove Kafka-esque Burden to Vindicating Property Rights

In order to create better telecom infrastructure, New York state law gives private telecom firms the power to take private property in exchange for just compensation. Verizon used this power to build terminal boxes on thousands of pieces of private property, thus essentially permanently occupying a part of the properties. Verizon is one of a few companies that enjoy this extraordinary, state-granted privilege to build things on other people’s property without their permission.

Those companies, however, must compensate the owners (at least theoretically) for these sorts of takings of property. Kurtz v. Verizon New York, Inc. arises from a putative class action alleging that Verizon failed to compensate 30,000-50,000 property owners for building terminal boxes on their property. Although Verizon is required to give property owners their “full compensation rights,” the plaintiffs argue that the company continuously flouts this requirement “as a matter of corporate policy and practice,” thus violating both the plaintiffs’ rights to procedural due process—for example, by not even notifying them that their property was being taken—and their Fifth Amendment rights to not have their property taken for public use without just compensation.

The U.S. Court of Appeals for the Second Circuit, however, ruled that the plaintiffs couldn’t proceed with their claims because of a case called Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City (1985), in which the Supreme Court ruled that plaintiffs with takings claims have to seek relief from state courts before proceeding with a federal claim. Otherwise, the case will be dismissed for being not “ripe”—not ready for a federal court to hear the case.

Although this may seem like a small hoop-jumping exercise, this procedural requirement creates an unnecessary and burdensome extra step that can prevent many plaintiffs from ever having their takings claims heard in federal court. No other enumerated constitutional right has a similar requirement. Plaintiffs claiming a First Amendment violation, for example, don’t first have to exhaust their case in state courts.

The plaintiffs are now petitioning the Supreme Court to review the continuing relevance of Williamson County. In a brief supporting the petition, Cato, joining the Pacific Legal Foundation, argues that takings claims are ripe when the taking occurs, not after a plaintiff has gone through the state courts. Moreover, we point out that Williamson County, when combined with other rules of civil procedure, has actually prevented many claimants from ever bringing a case.

After exhausting their claims in state courts, some plaintiffs find that federal courts will dismiss their case on the ground that the matter has already been decided (what lawyers call res judicata, or “judged matter”). Other times, defendants will ask the judge to move the case from state court to federal court and then, once the case is in federal court, will argue that the plaintiffs did not exhaust their claims in state court (which of course they couldn’t have done because the defendants removed the case).

This Kafka-esque system is not the way to properly vindicate constitutional rights, and it’s certainly not what the Supreme Court imagined when it decided Williamson County. The Court should take this case to remove an unnecessary and harmful barrier to the protection of private property.