In a letter last Friday to the New York City Taxi & Limousine Commission (TLC) obtained by BuzzFeed News, New York Attorney General Eric Schneiderman took a formal stand against a proposed rule that would largely limit the way app-based car services like Uber and Lyft operate in New York.
Schneiderman wrote that the proposed rules, as written, would unfairly limit competition. "From a competitive standpoint, these advances may lower the costs of entry for new for-hire vehicle services and encourage existing services to compete more effectively for both drivers and passengers."
The proposed ruling — which would prevent a base from dispatching a driver that was affiliated with another base (unless there was a formal agreement between the two bases) — would effectively limit Lyft's supply of drivers to the 10 that are affiliated with the company's base in New York. The one way around this is if other bases agree to allow their drivers to also drive for Lyft.
Ultimately, Schneiderman said that the mandate to pen formal agreements between competitors could have serious legal ramifications.
"Requiring agreements between competitors raises serious antitrust issues. Ultimately the proposed rule is likely to lead to market consolidation around a small number of the best-capitalized and most well-known services, whether large existing firms or well-financed newcomers. This market concentration will hurt consumers, who can expect fares to increase and service to decline. If this anticompetitive outcome followed from collusion in the industry, it would be illegal. It is no less disturbing as a product of regulatory action," the letter reads.
During a public hearing in October, Lyft argued to the TLC that requiring an agreement between two bases would encourage companies, like Uber, with more capital and resources to "lure drivers away from other bases" and eventually monopolize the for-hire vehicle industry.
"Here's what I think is going to happen," David Estrada, Lyft's vice president of government relations, told the TLC. "We are going to be forced to go lure the drivers to leave their affiliated base and go work with us, so we go and we lure these drivers with bonus payments … At the end of the day, the largest player — I will not name names — who is the most well capitalized even though they don't like this rule, they're incentivized by this rule to pay very, very large bonus payments to get enough drivers to affiliate with them."
Despite the obvious advantage, Uber also argued against the proposed ruling at last month's hearing.
"We don't regulate competitors out of business," Josh Mohrer, Uber's general manager in New York, told BuzzFeed News in an interview last week. "Uber doesn't do that. They can say what they want about us. The bottom line is we intentionally veer away from any kind of like regulatory manipulation that would put competitors out of business. It's not how you compete. It's not good for consumers, it's not good for drivers, it's really bad for everybody. That's not how we want to win."
Uber argued that one-third of its current drivers were part-time drivers and would be forced to pick between their current bases or transferring to one of Uber's bases permanently. That's 3,000 drivers, Mohrer said.
"If the rule is passed 3,000 drivers fall off the system and they'll be forced to pick, some will pick us but some won't," Mohrer told BuzzFeed News. "Sixty-five percent of the drivers we have with us weren't with us in July. The whole make up of our supply base has changed a lot. A lot of part-timers have come in."
In his letter, Schneiderman echoed many of Uber's own arguments and pointed to reduced wait times for passengers as well as less downtime for drivers between trips (so that drivers have the ability to pick up more jobs).
Black car and other car service companies as well as many full-time drivers of either Uber or Lyft are likely to be upset by Schneiderman's stance, given that many of them sent representatives to speak in support of the proposed ruling at the public hearing. Both the TLC and the companies cited concerns for accountability in that when a driver who drivers for more than one company is being dispatched it is not always clear which base he is driving for and thus can't be accounted for in terms of insurance or quality assurance.
In response to the original objective of the proposed rulings, Schneiderman suggested an alternative approach: "…allow drivers to formally affiliate with multiple bases, providing that each base is a member of the same worker's compensation scheme (e.g. the Black Car Fund.) This would avoid gaps in coverage. It would also ensure that the Commission has a record of which companies are affiliated with which vehicles, allowing the agency to effectively follow-up after a crash or consumer complaint."
The TLC postponed voting on the proposed rules at the last hearing in the face of an influx of opposing comments, it is not clear when the commission will choose to make a decision.