Handing the keys to ride-shares

The Observer editorial board

Uber uses an innovative technology model, but it’s still a transportation company.
Uber uses an innovative technology model, but it’s still a transportation company. BLOOMBERG

The ride-sharing giant Uber gets regular applause for its innovative digital approach to getting people where they want to go. But Uber is going old-school in getting what it wants from state legislatures, including ours.

A bill in the N.C. Senate would give ride-sharing companies, including Uber and Lyft, an ideal business environment. They would accept just enough regulation to satisfy lawmakers, while their competition – traditional taxi companies – would continue to be fiercely regulated in the N.C. cities they operate.

How did Uber manage to pull this off? They wrote big chunks of the legislation.

“Uber has come up with a model that 30 states are looking at right now,” Durham Sen. Floyd McKissick, a Democrat, told members of the Senate Finance Committee, according to the (Raleigh) News & Observer. “What we are doing in North Carolina is based upon that national model, and we have adopted substantial portions of that national model.”

It’s hardly unprecedented for industry lobbyists to pitch business-friendly legislation to lawmakers. But the public trusts its representatives to do more than a cut-and-paste job.

Unfortunately, that’s what the bill largely seems to be.

SB 541 would require that ride-share companies obtain a state permit for a minuscule $5,000 a year – the amount suggested by the ride-shares – and provide basic commercial liability insurance for their drivers. The bill also would require background checks on ride-share drivers, but it would leave that task up to the ride-share companies instead of requiring the stricter background checks often done by government.

The latter provision has been important to Uber, which has resisted efforts in several states to subject its drivers to the higher-level background checks required of taxi drivers.

But that’s not even the best part of SB 541 for ride-shares. The bill also forbids cities from “requiring licenses or regulating” ride-share companies, and airports can’t impose fees or limit the operation of ride-shares, as they do with taxis.

Uber and Lyft fans say this is as it should be. Ride-sharing, they say, is a new age business model that shouldn’t be subject to the same stodgy rules as taxis. But Uber and its brethren are transportation companies. They arrange for rides, then charge for them, then pay their drivers part of the revenue – just like taxi companies (some of which also have apps, by the way.)

Some lawmakers even argue that SB 541 overregulates ride-shares. “Why not just let it be?” said Republican Sen. Ralph E. Hise Jr. of Mitchell County, who argued for the “free market” to decide how ride-shares operate.

The reason: Government has long regulated vehicles for hire so that customers can be protected from bad drivers or abusive business practices. Uber, unfortunately, has a history dotted with both, including “surge pricing” during snowstorms and Hurricane Sandy.

Interestingly, lawmakers don’t believe taxi operators deserve the same free-market approach. Cities can continue to regulate taxis – as they would be smart to do. But such an arrangement creates an uneven playing field in the vehicle-for-hire industry.

Lawmakers, especially Republicans, are fond of saying that government shouldn’t pick business winners and losers. SB 541 does.

That’s what happens when you let one competitor make the rules.