Seattle has earned the dubious honor of being the first city to cap the number of drivers that rideshare services such as Uber may keep on the road.
Uber and companies like it represent a new type of cab ride for a new generation of smartphone-equipped riders, using apps and GPS coordinates to get passengers to their destinations without the bother of cash payments, 1-800 numbers, or whistling from street corners.
But these companies bring competition into heavily regulated, monopolistic taxi industries. Rideshare companies are often cheaper than conventional taxis and have cars that are much nicer, so it is no wonder that UberX (Uber’s lower-cost option) and its compatriots have earned the ire of these “old-school monopolies and incumbents,” as Uber investor Ashton Kutcher put it.
In fact, companies like these have met resistance from regulators and entrenched taxi services in virtually every city where they have entered the market.
But Seattle has taken it a step further. Companies will be allowed to deploy a mere 150 drivers apiece to serve a population of 630,000. Uber says its service will be virtually “unusable.” Mayor Ed Murray is expected to sign the new regulations into law.
UberX, Lyft, and SideCar—the services directly affected by this new regulation—employ nearly 2,000 drivers in the Seattle region. Back-of-the-napkin calculations show that under the new rules, nearly four out of every five drivers may have to be pulled off the road—that is, if the companies remain in Seattle at all. Lyft and Uber, unable to operate effectively under such onerous restrictions, may withdraw from the city entirely.
The Seattle city council wants to insulate a favored industry from competitive forces, but they may have exposed the city to the cost and headaches of a legal challenge. While states have wide latitude to regulate their economies, protectionism is not allowed.
For example, in Saint Joseph Abbey v. Castille, a group of monks successfully challenged a protectionist scheme in Louisiana banning anybody but a licensed funeral director from selling caskets to the public. The U.S. Court of Appeals for the Fifth Circuit ruled that there was no rational basis for the rule and that simple economic protectionism was not a legitimate governmental interest.
Other protectionist schemes have fallen recently in other federal jurisdictions, usually on the grounds that such regulations categorize citizens in arbitrary ways that violate constitutional rights to equal protection and due process of law.
One could certainly argue that some parts of the new regulations might further legitimate public interests, such as zero-tolerance drug policies or minimum driver insurance requirements, but sheer protectionism is something else entirely.
Mayor Murray himself called the caps on drivers “unreasonably restrictive and unworkable” and said he hopes they are a temporary bridge to future deregulation. Apparently in Seattle, you have to regulate first so that you can deregulate later.
In a statement, city council president Sally Clark claimed that the failure of regulations to keep up with the times has invited “disruptions” into the industry that need to be resolved fairly. But dragging down innovative companies in the name of “fairness” is a poor substitute for a swift kick in the taxi industry’s uncompetitive complacency.
Clark opined that in cities and countries all over the world, “companies have chosen to launch first, ask questions later.”
How dare these companies!
