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  • D.C. Taxis Fight Uber with Proposed Licensing Requirements

    In January, the Washington Taxicab Commission welcomed Uber, a smartphone-based car service, to the District with a sting operation. The charge: operating without a chauffer’s license. Uber won that fight, but its future in Washington remains uncertain.

    Uber lets users hail a limousine from their smartphones. A customer loads his or her credit card information into Uber’s smartphone application to arrange and pay for a ride. A driver picks up the customer at the location; when the car arrives, the app charges the card. After the ride, the customer can rate the trip on a five-star scale. Many Washingtonians find Uber faster and more pleasant than waiting for a taxi.

    That’s not good enough for the D.C. Taxicab Commission, which has proposed new occupational licensing requirements arbitrarily targeting each of Uber’s innovative ideas. Addressing the independence of Uber’s drivers, one measure mandates that each driver contracts through a sedan company that owns at least 20 vehicles. Another requires that each sedan come equipped with a device capable of providing a “detailed written receipt.”


    The most common justification for occupational licensure is consumer protection—we do not want just anyone performing heart surgery. But how does an unlicensed barber threaten consumer safety? Or an on-demand limo driver? Consumers who get a poor haircut can simply take their business elsewhere.

    Competition provides natural regulation that keeps quality high. Uber’s five-star rating system keeps drivers accountable. Any additional regulations from licensure in most industries are redundant—at least as far as protecting consumers goes.

    Economists have long argued, though, that support for licensing does not primarily come from consumers. It comes from producers. The time and expense of getting an occupational license makes it more expensive to enter a profession. Ergo, fewer people do. The laws of supply and demand then push up pay. Licensing raises occupational earnings by an average of 15 percent.

    Occupational licenses, like labor unions, effectively create a legal cartel. Like all cartels, licensure benefits insiders by keeping out competition. Which explains why taxicab drivers—not consumers—wanted the D.C. Taxicab Commission to crack down on Uber. Freedom of Information Act requests show that the commission has received zero complaints from Uber users wanting a paper receipt.

    Milton Friedman had it right:

    Licensure therefore frequently establishes essentially the medieval guild kind of regulation in which the state assigns power to the members of the profession.… In consequence, in the absence of any general arrangements to offset the pressure of special interests, producer groups will invariably have a much stronger influence on legislative action and the powers that be than will the diverse, widely spread consumer interest.


    Dan Roberts is currently a member of the Young Leaders Program at The Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

    Posted in Economics [slideshow_deploy]

    6 Responses to D.C. Taxis Fight Uber with Proposed Licensing Requirements

    1. Athan Rebelos says:

      Why would the DC taxi commission receive complaints about Uber? It's not a taxi company.

    2. Neville Waters says:

      The premise of this post is completely inaccurate. The DC Taxicab Commission (DCTC) is not considering any rulemaking that would be detrimental to Uber’s operations. On the contrary, DCTC has seen the number of competing electronic dispatch service providers increase in the local market with the Commission’s full encouragement.

      The term “sting” is a media appellation. In conducting regular market research, the Commission booked a ride through Uber to see how the service operated. Uber did not then nor at any time since receive any violation notice. The driver of the vehicle was in violation of several regulations including lacking proof of insurance and inappropriate car and driver’s licenses.

    3. Neville Waters says:

      The preliminary rules to establish a Sedan-class of public vehicle-for-hire are as follows: limit dispatch to text or email; provide the customer with the rate to be charged at the time of booking; use appropriately licensed drivers and vehicles; provide either a paper or electronic receipt at the conclusion of the ride; and a meter data transfer to the DCTC. There are no restrictions on fares and handheld GPS devices are deemed acceptable to calculate the fare. The 20 vehicle definition of a taxi company has no application to Uber as the company does not own vehicles. How can these elements of consumer protection be deemed as anti-competitive?

      The job of the Commission is to regulate by seeking the fair balance between competing interests. The objective is to provide a fair charge and a quality ride for the customer and a fair return on the labor and investment for the service provider. The Commission also expects to be treated fair in the media.

    4. carl johnstone says:

      Look at all the dead running it will save big monoply doesn't like competition

    5. steve says:

      Public transportation is not cutting hair. This is a rouge business that cannot even operate in the least regulated market in north americia. Regulations are to provide the public with affordable transporation for all not just ubers cool people. For their model to work there cannot be any regulation. Buyer beware, read their contract and publish it here. There is nothjng new about there ideas. Illegal sudan operarors paying off the door man is everywhere. Illegal operators at the airport stealing work. They can charge the drivers an outragous fee because it is illegal. Other legitimate apps get 50 cents a trip not twenty percent of a trip at double taxi rates. These guys are being investigated in every city they operate or are going to be sued. They are stealing work frlm legitame taxi and limo companies. Enforcement will happen.

      • Stephen says:

        I drive for Uber and can tell you that the public is relieved to have a more professional option than most DC Taxis offer. As a former Diamond Cab driver and dispatcher I am quite knowledgable of the actual state of the DC Taxi industry. People want to be picked up promptly in a clean, well maintained vehicle, and insist on being able to pay with a credit card if they wish. The fact that this level of service isn not being provided by the taxi industry guarantees that Uber and other services like it will continue to thrive throughout DC, Northern Virginia, and suburban Maryland.

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