City moves to regulate rideshare companies

February 5, 2014

AP Photo/Jeff Chiu

The days of Chicago’s Wild West of ridesharing services may be numbered, if the city has its way. The Mayor’s office introduced new rules at Wednesday’s City Council meeting, aimed at bringing the technology companies into the regulatory fold. But the move is already angering some who say the city should use its existing regulations for taxicabs and livery vehicles, rather than create a new set of rules.

“This is a new industry that’s still in the early stages and we wanted to step in, create some requirements that provide for public safety and consumer protection, but do that without essentially regulating the industry out of existence,” said Michael Negron, Chief of Policy to the Mayor.

The proposed ordinance creates a new category of commercial vehicle transportation, called “Transportation Network Providers,” meant for technology companies that connect people who need rides, to people who have cars. Currently, this would include companies like Lyft, Uber and Sidecar, which have operations in Chicago. Unlike taxi drivers, people offering rides with these services use their personal cars, which do not have to be registered with or inspected by the city. The drivers also do not have to undergo training or licensing as public chauffeurs.

“Now that the industry’s been up and running for a bit, we want to be able to step in and impose what we think are ultimately some common sense requirements,” said Negron, “that ensure that when people step into a rideshare vehicle they know that the driver has gotten a background check and the driver’s been drug tested and that the vehicle has been inspected and that they’re getting the fare disclosed to them.”

The ordinance would require the companies to register with the city and pay an annual $25,000 licensing fee, as well as $25 per driver with their service. It would also subject the companies to the city’s ground transportation tax — $3.50 per day, per vehicle, for each day that the vehicle is used in Chicago for ground transportation. Additionally, the vehicles would have to display signage or an emblem that identifies their ridesharing service, and would have to be inspected annually by the city.

But perhaps the most significant cost that the rules would require are general commercial liability insurance and commercial automobile liability insurance policies of $1 million per occurrence.

“Uber’s existing policy meets that requirement,” said Andrew MacDonald, Regional Manager for Uber Midwest. “The basic premise is our insurance policy, as designed with our carrier, does cover a driver on an Uber trip regardless of the personal insurance policy.” The company, however, declined to share a copy of that policy with WBEZ.

Several drivers, some of whom asked not to be named because they still drive for  UberX and Lyft, told WBEZ that they were offered little or no detailed information about the companies’ insurance policies when they went through their orientation sessions.

“People asked about what to do if there were problems,” one said, “but the answer was always to call Lyft Support,” a hotline that the service provides for its drivers. “They verified my insurance,” said another driver for UberX, “but never explained anything about what would happen in the case of a very bad accident.”

Lyft, too, claims to carry an insurance policy of $1 million per occurrence, but it is an “excess policy” that kicks in after the driver’s personal insurance has been used. The proposed ordinance would no longer allow this.

“For us, it’s like we are completely on board with provisions that increase consumer safety,” said MacDonald, referring to the idea of new regulations. “But beyond safety issues, I think controls on pricing, overreach on information, limitations on where cars could operate — all of that stuff starts to be not about safety, but starts to be about protectionism, and doesn’t benefit the consumer, and doesn’t create jobs, so that’s where I get really concerned,” he said.

The ordinance proposes that drivers with the services may collect fares determined by distance or time, or that are predetermined, or that are suggested donations. It would no longer allow the companies to apply formulas that calculate fares as a combination of time and distance. It also does not address “price-surging” or “prime time tipping” — a practice where Uber and Lyft hikes their fares when demand is high.

“This ordinance is simply enabling an illegal activity which is a cab-like activity to take place,” said Pat Corrigan, owner of The Yellow Group LLC, which operates Yellow Cab in Chicago. “So this is not something the cab industry can stand by and see.”

Corrigan and others from Chicago’s cab and livery industries say they are prepared to file a federal lawsuit against the City of Chicago to compel the city to regulate ridesharing services the same way as their industries.

“The public transportation system, which is the taxi system as you know it, has all these rules and regulations,” he continued, “including it can’t charge more than the meter. UberX, Sidecar and Lyft, can charge basically anything they want.”

Corrigan noted that cab companies must offer worker’s compensation, use vehicles that are less than four years old, accept forms of payment other than credit card, and service all neighborhoods of the city — requirements that are not part of the proposed rules for ridesharing companies.

The arrival of ridesharing companies has certainly complicated the city’s position. Under Mayor Rahm Emanuel, the city has touted itself as technology-friendly, and appears to have dropped early objections to Uber’s taxi operations in the city. But at the same time, Chicago brings in tens of millions of dollars each year in taxes and fees from taxis — an industry whose value rests largely on maintaining the value of the medallions.

“It’s certainly not good for the medallion system,” added Corrigan, “because you have another system that’s competing — a private system of transportation — for some of the people in the city that can afford it, competing against the public system.”

Taxicab medallion owners and lenders have been nervously watching the growth of ridesharing in the city, worried that it may undermine the value of their investments. Medallions, which the city issues in limited number to license taxis, are valued at roughly $350,000 apiece.

Odette Yousef is WBEZ’s North Side Bureau reporter. Follow her @oyousef and @WBEZoutloud.