Regulating Ride Sharing a Roadblock for the Free Market

Illinois suffers from a vastly underfunded pension system, rampant gun violence in its largest city, and is constantly watching jobs flee to more business-friendly states. But even with all that hullabaloo, incumbent Democrat Gov. Pat Quinn and his GOP challenger Bruce Rauner are stepping into a new debate in their toss up of a race: Uber.

Uber is a San Francisco-based ride-sharing service that is constantly growing across the globe. But while it is now in more than 70 cities across 26 countries, not everyone is along for the ride, with its dissenters mostly in government – or the taxi industry.

While Chicago passed some ride-sharing regulations in May, the taxicab companies did not think it was enough. A bill passed by the Illinois House, which is now sitting on Quinn’s desk, would require drivers of ride-sharing services to have commercial insurance and possibly a chauffeur’s license. Given that this is an election year, Quinn may sit on his decision and make a calculated choice, but Rauner, the Republican venture capitalist opposing him, is coming out strongly against the bill.

“We need less business regulation in Illinois, not more,” Rauner told the Chicago Tribune.

Rauner, who is not beloved by all conservatives, might just be using this as another campaign issue or to protect his own interests (he holds stock in Goldman Sachs, which invests in Uber), but in doing so he is jumping into an important debate. Proponents of ride-sharing regulation point to well-intended ends in increased safety and consumer protection. But in addition to protecting riders who might hypothetically get into accidents, the regulations are certainly protecting the taxi industry.

It’s a familiar case, and it’s the same situation in every debate over ride-sharing regulations. The first high-profile issue over ride sharing occurred in Washington D.C. in 2012 when the D.C. City Council unanimously passed an act to update its regulations for technologies like Uber. D.C. was following the lead of California, which passed similar regulations a month before, but unlike in California, D.C. had a debate.

While the city thought the D.C. Taxicab Commission should regulate Uber, James Sherk and Dan Roberts at the Heritage Foundation contended the city really wanted to regulate competition.

“Occupational licenses, like labor unions, effectively create a legal cartel,” the two wrote in October 2012. “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.”

Likewise, Jack Evans, a D.C. Council member who opposed the regulations, called the company’s existence in the city “the free marketplace in operation.”

“Uber is not something you have to do,” he told NBC Washington then. “You can take a taxi if you’d like to do that, but there are also times you want to take Uber, and if you are willing to pay a higher amount during peak hours, you should be allowed to do that.”

Evans and the Heritage Foundation’s authors are both right in their analysis. Ride-sharing services are not only the free marketplace in operation, but are the perfect example for a debate on government regulation on free enterprise.

Uber, like Evans said, is not something you have to do. It is a choice and an alternative to the already-regulated taxicab cartels. Competition makes everything better, or so some believe, and Uber provides just that: a viable, voluntary alternative.

But the taxi cartels are not going to accept the competition, especially when they can get elected officials to do their bidding.

In 1991, Milwaukee issued a taxicab permit cap of 321, which ended up favoring existing cab companies who then acquired all the permits. As a result, permit costs skyrocket to as much as $150,000. It wasn’t until last year, after a lawsuit from the Institute for Justice, that the Milwaukee County Circuit Court issued an injunction preventing Milwaukee officials from denying permits to qualified drivers. Milwaukee ended up granting up to 100 new taxicab permits for this year, but things got complicated again when Uber entered the city in February.

Milwaukee Alderman Bob Bauman quickly asked the city attorney to file a lawsuit against Uber, and Milwaukee City Clerk Jim Owczarski pushed regulations on the company just as fast. When Owczarski first heard Uber planned to come to Milwaukee, he immediately said they needed to apply for permits – something that, even with the 100 new permits, is not a very attractive demand for Uber to meet.

Uber is still in Milwaukee, though, and throughout the world. It has lost legal fights ­– in Portland, Ore., and Miami notably – and could face a serious setback in Chicago shortly. Whatever Rauner’s true motivations are in supporting Uber, it’s important he understands that in taking his stance he is taking the side of the free market. It’s not just about transportation.

The argument of whether ride sharing is a worthy alternative to the taxicab cartels might not be exciting to everyone, especially those who have never used the former, but it’s also a debate pitting the free market against big-government highbinders. And that’s a feud with interest for everyone.

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