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Ridesharing or running an illegal taxi/limo operation

written by andy on

The so-call ride-sharing companies like Lyft and Sidecar have been operating a service in the SF Bay Area where the customer uses an mobile app to request a ride, and where the company would then dispatch a vehicle for the customer. Those companies differentiate from the traditional taxicab and limo service because of the mobile app, and more importantly, the car is a personal vehicle of the driver, which contracts with the mobile app company.

Aside from the mobile app use, the major problem with these companies is that they’re unfairly competing with taxi and limo providers by not complying with state and local regulations, along with mandatory insurance requirements. As someone who runs a commercial transportation myself, I can tell you the regulations that I have to comply. The cost of compliance (especially the insurance requirement) also raise the cost of operation far beyond the cost of owning a regular, private car.

It is not necessarily illegal for a driver of a private car to give rides to someone else. In fact it is encouraged by the government through services like The laws that regulate limos and buses exempt carpools and vanpools. The main differences between taxis and carpools are that people who carpool tend to have the common origin and destination, and that the driver is doing it on a non-commercial basis (by not giving rides all day and not making an income as if he or she is holding a job). Clearly most Lyft and Sidecar drivers are giving rides all day and drive throughout the area as if it is a taxi or a limo.

Recently the California Public Utilities Commission, which regulates passenger transportation (except public transit and taxis), among other things like gas and electricity, is considering updating its regulation to address the services that are offered by these companies. The CPUC earlier tried to put a stop of these services by issuing cease-or-desist letters to those firms.

My take is that those ride-sharing operations, if they choose to allow vehicles to operate like a taxi or a limo, they need to comply with the safety and insurance requirements of a limo. They need to operate on a level playing field with traditional providers. If they choose to facilitate legitimate ridesharing, they need to make sure that their drivers are not doing so to make a living. (Also see SFMTA’s comment on the issue, which I largely concur with)

If somehow laws can be changed so that a private vehicle can legally provide rides like a taxi or limo, I don’t think those app-driven companies would stay in business for long because of likely competition from traditional car rental companies. Presently, the car rental companies are allowed only to give rides to their customers to and from rental locations without a separate charge. Unlike Lyft and Sidecar, they are in a better position with their large fleet of late model cars and their own cleaning and maintenance facilities. Currently, car rental companies employ drivers just to drive empty rental cars between airport, other rental locations, and maintenance facilities. They might as well use those drivers to give rides to the public. It is relatively easy for other companies to develop a competing app, but much harder for a new company to compete against traditional car rental companies.