Smartphones have enabled many businesses to pitch directly to consumers, and ridesharing companies Lyft, Uber and Sidecar have taken full advantage of the technology. These car-sharing apps are wildly popular in Chicago, but legislation presented at the March 27 meeting of the Committee on License and Consumer Protection would unduly regulate rideshares at consumers’ expense.
The legislation follows complaints from taxi companies that rideshares unfairly poach customers by evading the city’s stringent taxi regulations. The city responded March 27 with an excessive ordinance that would impose a $25,000 annual fee on rideshare drivers, require companies to conduct more thorough background checks and certify that all their independent drivers are insured.
Though rideshares and cabs are clearly not on level ground, rideshares are the business model of the future. The city should bring the taxis up to speed with this business model rather than force rideshares to pay crippling fees.
There are hundreds of Lyft drivers in Chicago, according to spokeswoman Katie Dally. She said drivers pocket 80 percent of the fare, but the company does not keep record of their hourly rates. However, hourly earnings tend to average $15 to $25, according to a Los Angeles Lyft driver’s Sept. 20 Ask Me Anything session on Reddit.com. By comparison, Chicago taxi drivers brought home an average income of $25,010 in 2012, approximately $12.02 an hour for a 40-hour week, according to May 2013 Bureau of Labor Statistics data, even though many taxi drivers work more than 40 hours per week.
Although taxis and rideshares offer the same service, rideshares are decidedly unregulated while taxis must meet a host of requirements before hitting the streets. Therefore, regulating the rideshare industry would level the playing field without rendering the service the same. As of February 2013, Chicago taxi companies pay an average of $344,000 per medallion to get an authorized vehicle on the road, according to the Department of Business Affairs and Consumer Protection.
With increasing demand for rideshare services, it would be unwise to burden the budding industry with steep taxation and rigorous regulation. Instead, the city should take this time of transition as an opportunity for the cab industry to advance. Rideshares are popular because they provide better service at a fraction of the cost, plus the drivers are friendlier, the cars are cleaner and there is a shorter wait when ordering a car. While the legislation is working to level the playing field, cab companies and drivers should improve their customer service if they want to compete with rideshares.
However, it can’t be ignored that Lyft, Uber and Sidecar are operating within a legal loophole that needs to be closed for riders’ safety. Although the companies claim to do background checks on drivers, a Feb. 14 Chicago Tribune report revealed that an applicant with a criminal record and poor driving history bypassed Uber’s employment check.
The city needs to increase regulations on rideshares while avoiding the excessive requirements imposed on taxi drivers. The government’s tight grip on cabbies prohibits them from competing with the loosely regulated rideshares, but crushing these consumer-friendly companies is not the solution. The city-mandated insurance requirements and background checks are imperative, but the steep fees could discourage drivers from participating and in turn make the system more expensive for potential drivers.
The rideshare and taxi industries compete for the same pool of customers, but the city government needs to regulate them equally to prevent conflict and serve Chicago’s citizens in the best way possible.