Regulatory Regime Tries to Put the Brakes on Competition

Have you ever given a friend, co-worker or babysitter a ride in your car? You could be a criminal.

Car service apps such as Uber and Lyft allow a user to request a car, pay the driver and provide feedback about the ride — all using one’s smartphone. Drivers for these car services commonly use their own vehicles and users can specify their preferred vehicle type. Ride-sharing apps have exploded in popularity in recent years. Uber, for example, now operates in 70 cities since its 2009 launch.

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Whether it’s the novelty of hailing a ride via smartphone, or the responsive service provided by drivers, customers of these services have a seemingly unnatural enthusiasm for this method of transportation. In Washington, D.C., users post comments about their ride at the Twitter hashtag #UberDCLove.

I don’t know about you, but I’ve taken scores of taxi rides and I’ve never used the word “love” to describe the experience. 

Innovation, however, has a way of exposing preferential treatment written into the law. In cities across the country, regulators are targeting drivers and shutting down ride-sharing services. A good idea should never go unregulated, right?

In Michigan, transportation regulators in Detroit and Ann Arbor issued cease and desist letters to Uber, telling the company to terminate operations or face stiff financial fines and jail time. This reaction is quite common; according to the Detroit Free Press, taxi drivers in Chicago sued to shut down ride-sharing services and Uber drivers have been arrested for unauthorized pickups at the San Francisco International Airport. In June, taxi drivers in Washington, D.C., brought the city to a halt by staging a protest of Uber. (Uber gleefully offered rides to anyone who couldn’t catch a cab.)

State and city officials argue that public safety concerns call for careful regulation of new car services. Drivers, they say, should be specially licensed, the company should be insured, and fares  should be disclosed. Another common refrain from regulators is that we need strict rules about transportation and we must all live under the rule of law. 

The law, though, is not merely being used as a standard of good behavior. It’s wielded as a regulatory club to reduce competition and innovation.

Fans of Uber and Lyft may be puzzled at the official response to the new transportation options, but it’s not a new phenomenon.

Frederic Bastiat wrote in 1850: “See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.” Even more to the point: “The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protect and encourage his particular industry….”

Public safety is a legitimate concern, but the barriers to entry for vehicle services (just to name one occupation) should not be designed to protect a monopoly and crowd out new innovators.