EDITORIAL: Taxi cartels aim to run upstarts like Uber off the road

Convenient alternatives face barriers to market entry

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There’s a war on in the courts and city halls between the taxi cartels and ambitious independent drivers who offer residents a ride with a smartphone app. The taxicab industry is filing lawsuits hither and yon, trying to divert high-tech ridesharing firms such as Uber, Lyft and SideCar onto a dead-end street.

Taxi drivers are highly regulated and tightly organized, making them a formidable political force that local politicians are loath to cross. Many big cities require the purchase of a “medallion” for the privilege of owning a cab. The scheme restricts the number of drivers so severely that $1 million is required to buy a medallion and start as a cabbie in New York City.

Upstarts with the backing of venture-capital firms figured out a better way. Instead of expecting customers to stand on a busy street corner, waving a hand in hopes of getting a cab — usually futile during rush hour — entrepreneurial drivers devised a way to let computers do the work. Press a button on a mobile phone, and the nearest rideshare car or wagon as located by GPS is dispatched to the waiting rider.

Drivers for the new services must pass a short safety course and a background check. There’s no limit on the number of drivers. These popular services have been growing so swiftly that some drivers are leaving taxi companies to drive for the upstarts, which can pay up to $40 an hour and allow drivers to set their own schedules.

A taxi medallion isn’t as precious as it once was. The taxi cartels feel the heat and have been asking government to snuff the competition.

In Miami, Uber is prohibited by a rule forbidding taxi and limousine services from providing services for less than an hour a ride. The city established a minimum fare of $80 and limited the number of drivers, designed to drive the upstarts from the street.

Seattle limits the number of drivers the high-tech startups can put on the road at one time, cutting the number of available taxis by two-thirds. In Chicago, Mayor Rahm Emanuel, not wanting to waste a manufactured crisis, proposes a new licensing scheme that would require ridesharing firms to pay a $25,000 annual fee, in addition to hefty per-drive and per-ride taxes.

A taxi drivers’ union filed a federal lawsuit in Chicago demanding a judge limit the number of drivers Uber and Lyft can put on the streets. The Institute for Justice filed a motion on Tuesday to dismiss the complaint.

“There is nothing in the Constitution that protects taxicab companies from competition,” says Institute lawyer Anthony Sanders.

In Washington, attempts to suppress Uber failed, and residents have reaped the benefits. During the winter’s big snowstorms, the D.C. Taxicab Commission tacked a $15 “snow emergency” fee on taxicab fares. Uber didn’t exploit the bad weather to raise fares, and the company offered the least expensive way to get through the ice and slush.

In cities such as Seattle and Chicago, residents must take their slim chances of getting a ride in the rain and snow, and there’s no incentive for the taxi cartels to adapt to the new technological reality. Prosperity for all comes from encouraging innovation, not coddling greedy cartels.

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