Monday, February 3, 2014

Chicago looking to regulate ride-sharing businesses

"Shared rides'' for hire, advertised as a less-expensive and hip alternative to taking a taxi, have been growing in popularity across the Chicago area and the U.S. — virtually free from any government oversight.
The Emanuel administration, which has strongly supported commercial ride-sharing since it started locally about a year ago, now is saying that the absence of regulation will end soon in the city, pointing to a draft ordinance that has been in the works for six months.
City officials said that while the technology companies offering ride-sharing are helping to boost Chicago's efforts to be a hub of innovation and entrepreneurship, enforcement is needed to protect the public, both on safety and consumer fronts.
Yet advisers to Mayor Rahm Emanuel declined to say why ride-share services, which critics call "illegal taxicabs," have been allowed to flourish unregulated in the first place.
Commercial ride-sharing services are provided by nonprofessional drivers, using their personal automobiles. Customers use smartphone apps to order rides, which are offered through Uber X, Lyft, SideCar and other companies competing for business against the highly regulated traditional taxicab operators.
"Lyft is your friend with a car," the website recruiting drivers for the Lyft car-sharing company says.
The online site for SideCar states: "You drive every day. Why not get paid for it?"
As technology firms that do not provide any transportation directly, the companies have opposed regulation. Their service is similar to eBay, they argue, because they are merely middlemen — in this case a technology platform providing dispatch services to connect the drivers who use their personal vehicles with customers, who register for memberships and use their smartphones to hail shared rides and pay using the app with credit or debit cards.
These new companies in the transportation industry currently enjoy big advantages over taxis that have not always benefited the public, city officials said.
No special license or training is required to become a shared-ride driver. Decisions to fingerprint and conduct criminal background checks on driver applicants are left up to the companies. There are no rules covering the age, condition or mileage of the cars used in this commercial service. And the rates can fluctuate wildly, based on customer demand at a given moment. Uber X, for instance, calls it "surge pricing."
In addition, unlike taxi drivers and other professional livery drivers who must obtain chauffeur licenses, no requirements currently exist for ride-share drivers to serve all parts of the city or to accommodate wheelchairs in their vehicles.
"Ride-share companies like Uber X, Lyft and SideCar are operating in a regulatory vacuum," acknowledged David Spielfogel, senior adviser to Emanuel. He said it's a problem that current city laws do not regulate the companies or impose requirements on their drivers.
"We are developing an ordinance that regulates ride-share companies to protect consumers and ensure that riders are safe," Spielfogel said. It is expected to be introduced to the City Council in about a month, he said.
Details in the 20-page draft ordinance, obtained by the Tribune, include requiring the ride-share companies to conduct regular criminal background checks on driver applicants, check their driving record and do drug tests. Driver training will be required, and vehicles must pass an annual 21-point inspection.
The companies also will be required to obtain comprehensive commercial liability insurance that covers all vehicles that operate as ride-share vehicles, under the draft amendment to the city code. The proposed ordinance sets a $25,000 license fee for ride-share companies, plus $25 per driver. It also requires the companies to pay the city's ground transportation tax, among other requirements.
Taxicab medallions in Chicago currently cost more than $300,000 per vehicle.
Edward Feldman, an attorney representing the taxicab and livery industries, said those businesses are generating $24 million in taxes and fees to the city each year. He predicted city revenue will drop off significantly because of ride-sharing.
"It's one thing to say smartphones and apps are cool and they are a great way to connect passengers with a ride. But that's already happening (to dispatch trips within the taxi industry),'' Feldman said.
"Why in the world would the city now want to have a separate set of transportation rules for drivers who aren't required to go to driver's school for six weeks, aren't required to have a professional chauffeur's license and aren't even required to drive a newer vehicle?" Feldman said.
City officials and state regulators said it appears members of the public who currently use the ride-shares are largely in the dark about gaping holes in consumer protections and safety that currently exist.