Getting around town in the share economy

One of the most vibrant areas of recent economic development has been the “share economy.” Facilitated by popular smartphones and animated not only by economics, but also by many people’s interest in expanding social networks, peer-to-peer (P2P) software applications now facilitate services from shopping to local accommodations.

These services typically involve the use of personal property. As a result, they have run into resistance from established commercial operations and in some instances local regulators. One prominent example of this clash of the old and new economy has been ridesharing, the latest evolution of the once ubiquitous college ride-board. Entrepreneurs have facilitated new forms of ridesharing that use Internet-based technology to connect customers with people interested in providing transportation with their own cars and allow for payment in a variety of ways. These ridesharing services can spur competition by providing consumers with new ways to more easily locate, arrange, and pay for rides, as compared to traditional commercial methods such as hailing a taxi on the street or calling a taxi dispatcher. But they can also raise some legitimate consumer protection concerns.

FTC staff recently submitted a letter to Alderman Brendan Reilly of the Chicago City Council regarding a proposed ordinance that would allow for the licensing and operation of some ridesharing services, called transportation network providers (TNPs). We praised the ordinance for making it possible for some rideshare apps to operate using personal vehicles. However, staff noted that some of the proposed provisions in the ordinance are likely to limit the benefits to consumers without providing them with any apparent protections. The ordinance would:

  • impose a significant license fee on the apps that would make it more expensive for them to operate and likely lead to higher costs for consumers.
  • restrict their use of varied and creative pricing methods, and impose elevated insurance requirements that don’t appear to be connected to any evidence of risk to riders compared to commercial taxis.
  • flatly ban TNPs from serving Chicagoland airports and the convention center with no apparent justification.
  •  impose extensive records and data collection requirements, raising some concerns about both competition and consumer privacy.
  • prohibit TNPs  from owning or financing vehicles if they wanted to, and cars used to provide services would be prohibited from having any in or on-vehicle advertising.

Each of these restrictions seems likely to limit competition and the consumer benefits of legalized ridesharing and blunt the perceived threat they pose to incumbent commercial taxi and sedan services rather than protect consumers from some kind of harm.

Competition is at the heart of America’s economy. Vigorous competition among sellers in an open marketplace can provide consumers the benefits of lower prices, higher quality products and services, and greater innovation. This is just as true for app-based transportation and other kinds of P2P services. So while staff praised Chicago for moving in the right direction, we urged them to keep moving.

The author’s views are his or her own, and do not necessarily represent the views of the Commission or any Commissioner.

Comments

Federal law prohibits discrimination against the disabled. Commercial "rideshare" services are notorious for non-service to the disabled. Why didn't the FTC raise a concern to Chicago regulators about that?
Dear Charles – Thanks for your comment. Our letter to the Chicago City Council was addressed solely to provisions of the proposed ordinance that would restrict competition from rideshare services, none of which addressed handicapped accessibility or discrimination. Those sorts of concerns may well be addressed by the City Council, but lie outside of our area of expertise. Best, Andy
Private Insurance does not cover transporting VFH period. UBER nor Lyft has commercial insurance policies in drivers gloveboxes-letting companies such as UBER And Lyft circumvent commercial insurance laws by ILLEGALLY FALSE ADVERISING AS A RIDESHARE WHICH THEY ARE NOT puts the public at harm as well as the economy which will suffer when private insurance rates are raised to compensate for Ubed/Lyft Risk This is the definition of unfair competition-now with this p2p tech independent cabbies & UBER Lyft drivers SHOULD ENJOY a deregulated marketplace- But FTC must establish uniform VFH drivers licence requirements as well as insurance requirements on a nationwide platform Companies like MYTAXI GETRIDE TaxiMagic are working with legally insured drivers- FTC needs to stop UBER/Lyft false advertising RideshAre claims-they are VFH companies period. Create a national uniform drivers licence for VFH drivers. & insurance standards for UBER/Lyft-James River insurance isn't recognized in USA-besides it insurers a shell company not UBER-please protect DRIVERS AND CONSUMERS
Colorado recently passed a new law, which the Governor signed, permitting ride share companies to operate in Colorado under conditions that would eliminate your concern. The new law requires a ride share driver to have commercial insurance. The commercial insurance kicks in the moment the consumer signals via their mobile device app that they want a ride. So, the private insurance carrier would not have any exposure for damages caused by the ride share driver's negligence. This kind of law is good for the consumer as it protects the consumer, eliminates the confusion over which carrier would be responsible and fosters competition.
UBER Lyft drivers SHOULD ENJOY a deregulated marketplace- But FTC must establish uniform VFH drivers licence requirements as well as insurance requirements on a nationwide platform Companies like MYTAXI GETRIDE TaxiMagic in <a href="http://www.taxiserviceinnagpur.in/">taxi service in nagpur</a> are working with legally insured drivers- FTC needs to stop UBER/Lyft false advertising RideshAre claims-they are VFH companies period.

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