Riding with Strangers: Regulating ride-sharing in Chicago and Illinois

 /  April 14, 2014, 2:19 a.m.


Uber and other ride-sharing services like Lyft are changing the way that people get around major U.S. cities. Now these darlings of Silicon Valley are being targeted by the politically connected taxi industry. Ride-sharing companies, which are based on the model of connecting people looking for a ride with ordinary people registered as drivers, have quickly become a popular alternative to taxis in large cities including Chicago. The taxi industry points out those ride-sharing companies offer essentially the same services as taxi companies, yet do not face the same kinds of regulations.

On the other hand, ride-sharing companies and their supporters state that they are providing a convenient and cost-effective alternative for consumers to get from one place to another and for drivers to make extra money on the side. They assert that treating their businesses like the taxi industry would lower their effectiveness, prevent the public from accessing a viable and sometimes preferable alternative, and stifle innovation.

In February, Mayor Rahm Emanuel proposed a city ordinance that sought to place some regulation on the popular programs. The ordinance would have required that ride-sharing companies purchase licenses to operate in the city for $25,000 plus $25 for each vehicle operating under the transportation network. While significantly cheaper than the taxi medallions that taxi companies have to purchase for their drivers, this would still have hampered the growth and attractiveness of services like Uber’s popular UberX. It remains unclear whether these measures, if passed, would lead to increased prices for ride-share consumers. The ordinance would also have required that drivers take and pass a background check and a drug test. Other regulations in the February ordinance include access to GPS location data, prohibition of commercial advertisement, and pricing rules.

The ordinance appeared to have satisfied no one. Proponents of ride-sharing criticized the city’s move to restrict a fast-growing and popular industry. They argue that the new regulations would give unfair advantages to the politically powerful taxi industry. The new regulations would force companies like Uber to have a distinguishing emblem to identify the vehicles as ride-sharing vehicles. The proposed regulations have also raised privacy concerns because the regulations would allow the city to access GPS tracking logs without first requiring a warrant. On the whole, critics claim, the ordinance served no purpose but to protect the taxi industry from competition. They also point to the prohibition of commercial advertising in vehicles not licensed by the city as an example of the unfair edge that the taxi industry would have, if their ordinance was passed, over competitors like Uber and Lyft.

On the other hand, the taxi industry feels that the ordinance does not go far enough, arguing that the cost of the license for ride-sharing vehicles pales in comparison to the at least $300,000 taxi medallions. In addition, they claim that it is unfair that ride-share vehicles are not required to be handicap accessible and that ride-share drivers are allowed to pick and choose which requests to respond to while taxi drivers have to serve everyone.

In early April, the Emanuel administration updated the proposed ordinance to specifically address the problem of surge pricing, a mode that some ride-sharing pricing models use at peak-demand times such as rush hour. Riders have complained that the price rose dramatically during surge pricing and that they were not given ample or clear notice. The tweaks aim to change that by requiring services like UberX to publicly announce when they enter surge-pricing mode and provide price quotes for the customers. Uber has in the past responded to customer complaints and changed the way that the Uber app notified customers about price surges, but customers continue to complain.

Around the same time as the updates to the proposed city-level regulations were released, the Illinois House voted to pass a bill, proposed by Rep. Mike Zalewski, that would require many of the same provisions but would also limit the number of hours a ride-sharing driver can be on the road and establish different rules for drivers who are clocked in for eighteen hours a week or more. Despite having to concede on their push for taxi medallions for ride-share drivers, the taxi industry was satisfied with the bill for leveling the field.

The debate is about ride-sharing but the ultimate decision will set a precedent for how the city handles situations where popular new companies based around technological advancements are in direct competition with established, government-supported industries. The city ordinance seems to have made no one happy—ride sharing supporters have criticized the ordinance as government overreach while critics argue that it doesn’t go far enough. If ride-sharing companies want to continue expanding and gaining legitimacy, then security measures like background checks and driver training are reasonable. While part of the appeal of groups like Lyft to drivers is that anyone with a car can earn some extra cash, it is not out of the question to risk some of that appeal for the sake of rider safety.

Frequent ride-share users will be unhappy to learn that the proposed ordinance would also prohibit ride-sharing vehicles from picking up at Midway Airport, O’Hare Airport, and McCormick Place. This policy is not meant to make the service safer, more accountable, or more efficient; instead it is purely there for the purposes of protecting the taxi industry. The city profits from the taxi industry and therefore, it is not surprising that the city wants to protect it. However, innovative business models founded on the benefits of technology and social media are a reality in the transportation market going forward, and neither the City of Chicago nor the State of Illinois can prevent them from attracting business.

Kevin Shi


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