All NYC for-hire vehicle drivers are now losing a valuable revenue stream as a result of the actions and inaction of the New York City Taxi and Limousine Commission (TLC). In July, the TLC won a legal battle that had briefly required the agency to allow advertising to be displayed on the insides and outsides of for-hire vehicles (FHVs). With the court ruling in its favor, the TLC hastily announced that it was scrapping its nascent FHV advertising permitting program and ordered all ads removed from vehicles after the permits all expire on August 31, 2019.

In the past year, the City has gone to great lengths to help ensure adequate pay for drivers that work for Uber, Lyft and other app-based companies. Allowing FHV drivers to generate extra revenue through advertising like yellow and green taxis hardly seems controversial. Despite confusion in the media created by statements from the TLC, the court case does not prevent the TLC from allowing ads on FHVs. The only thing stopping the TLC from doing so is the TLC. All of this has left many to wonder why the TLC would choose to take away a meaningful source of income for these drivers who are still struggling despite the minimum pay regulations, when many other cities around the country have – and continue to allow – advertising to help drivers.

While rooftop advertising has been a mainstay of the taxicab industry for decades, static advertisement displays have been limited in their overall economic boost to drivers and operators. Today, new technologies and the reduction in component costs have enabled the use of LED displays for rooftop advertising and interactive in-vehicle screen displays that offer entertainment, and which can be controlled (i.e., turned off) by passengers. These displays are able to generate significantly more revenue and, as a result, provide drivers and operators with several times more income than their static predecessors.

The New York City Administrative Code explicitly authorizes the TLC to issue advertising permits to any vehicle licensed by the Commission. While the TLC had enacted rules regarding interior and exterior advertising on taxicabs, it was not until 1999 that the Commission enacted similar rules regarding for-hire vehicles to “promote consistency with respect to the regulation of advertising on both taxicabs and for-hire vehicles by allowing for-hire vehicles to display appropriate advertising after the owner has obtained a for-hire vehicle advertising permit from the Commission.” Despite the FHV advertising rules’ stated purpose, the TLC did not issue any advertising permits to FHVs until a federal court enjoined the Commission from enforcing those rules in 2018.

In February 2018, a Minnesota-based advertising company sued the TLC after the agency refused to grant the company permits to display video advertising on tablets mounted in the backseats of Uber, Lyft, and other rideshare vehicles. The company – Vugo, Inc. – claimed that TLC’s refusal to allow the ads violated the First Amendment right to free speech. The TLC argued that the agency’s restrictions on advertising inside FHVs are justified because the screens are annoying to passengers. The federal district court sided with the advertising company, finding that the TLC’s ban on advertising was unconstitutional, and prohibited the TLC from enforcing those rules. On appeal, the federal appeals court reversed the lower court and upheld the TLC’s decision to ban advertising inside FHVs. The appellate court denied the advertising company’s request to review and reverse its decision – meaning their only hope is for the U.S. Supreme Court to take the case, which would be a long shot.

The basis of the TLC’s unsupported assertion that video screens are annoying is, of course, purported passenger complaints about Taxi TVs that are in the back of every yellow and green cab in the City. Addressing the apparent inequity in allowing ads to play in taxis but not in FHVs, the TLC said that the only reason it allows video advertising in taxis and street hail liveries (green cabs) is to offset the cost of the screens that play the ads and provide other required technology.

In 2006, the TLC began requiring taxicabs to be equipped with a Taxi TV and technology to process credit card payments and collect trip data among other things, collectively referred to as a Taxicab Technology System or “T-PEP” system. Taxi drivers and vehicle owners do not earn any income from the advertisements displayed on Taxi TVs, but the ads offset the cost of the devices.

The data and alleged complaints have NOT been made public by the TLC. In fact, I was the Commissioner/Chair of the TLC and the creator of the Taxicab Passenger Enhancement Program (T-PEP), and was, unlike most current executives at the TLC, integrally involved in every aspect of the project. In fact, we had hired consultants at the time to conduct surveys and passenger interviews to gauge passenger acceptance, and the results did include some concerns, but ultimately changes to the way the screens were used passed muster and were allowed. There are two points to make here: (1) why would a regulator say it is acceptable for a passenger taking one mode that has been suffering economic loss (taxicabs) to be “annoyed” by in-vehicle TV screens and seek to protect competing companies’ (e.g., Uber and Lyft) passengers from annoyance?; and (2) many of the for-hire screens on the market are more discreet and less intrusive than the T-PEP units, with engaging non-advertising content and a more relaxed or subtle approach than the Taxi TVs.

The advertising industry claims they have research that passengers are less annoyed with the screens than the TLC seems to think. In fact, records provided by the TLC pursuant to a Freedom of Information Law response show that, during the time the agency allowed screens in FHVs, the agency received, at most, one complaint that could possibly be related to video advertising in an FHV, but could also be attributed to a Taxi TV. Also, the TLC has provided no evidence to show that passengers are annoyed with other forms of advertising, including exterior wraps and rooftop digital ads.

During the time that the TLC was legally barred from enforcing its FHV advertising rules, the agency freely granted permits to FHV owners who wanted to make money by selling ad space on the insides and outsides of their vehicles. In addition to displaying video advertising inside their vehicles, drivers were installing rooftop displays and wrapping their vehicles with advertising. Drivers were earning up to an extra $300-$400 per month by simply driving as they usually would.

The TLC claims that it has seen “no evidence of drivers benefitting from advertising, and only 70 out of 120,000 for-hire vehicles have permits for exterior ads.” This figure does not include the thousands of tablets and screens that are currently installed inside vehicles to display video content. FHV drivers and the Independent Drivers Guild (IDG) – which represents 85,000 drivers who work for Uber, Lyft, and other app-based companies in New York City – dispute these claims. According to the IDG, the ads can generate an extra $4,000 annually without having to log more hours on the road, and approximately 1,000 drivers were on a waiting list to obtain permits to display digital rooftop ads. On September 10, 2019, the IDG called on the TLC to allow FHV advertising at a driver rally outside City Hall ahead of the Council’s oversight hearing on the TLC.

It remains to be seen how the issue of FHV advertising will be resolved in NYC, but it is more likely than not that the TLC will buckle under the intense political pressure from the drivers, which has only just begun. While there may have been reasons 10-20 years ago to not allow advertising for safety, aesthetics, and other policy concerns, in the current environment, where unchecked massive expansion has led to driver unrest, pay diminution, and despair resulting in several driver suicides, there is now a compelling rationale to allow it to help drivers make ends meet.

Uber and Lyft drivers are still struggling despite the TLC’s minimum pay rules. The ads provide FHV drivers with upwards of $300 per month, which is what they earn from 12 hours of driving. To claim that rooftop advertising does not benefit FHV drivers is simply false. While the TLC wants the industry to believe that they are simply maintaining the status quo and have not changed their policy on FHV advertising, to countless drivers across the city, the reality is that the status quo threatens their quality of life and economic security. The TLC has the ability to continue to allow FHVs to display interior and exterior advertising, despite the court decision, and has actively chosen to do nothing to help drivers. Rooftop FHV advertising on FHVs had only just begun to ramp up before TLC pulled the plug on this new revenue stream for drivers.

NYC is operating on a regulatory island when it comes to advertising. Many other jurisdictions around the United States and beyond allow taxi advertising, wraps, and interior advertising, and it is more often the norm and not the exception. Most states’ TNC regulations do not address exterior or interior advertising, and many taxi regulations are vague.

New York City expressly allows rooftop ads on yellow and green cabs, and the TLC has adopted detailed regulations to govern the permitting process. Similarly, Chicago regulations provide for regulated vehicles, including TNCs, to purchase permits to display advertising. The District of Columbia allows rooftop advertising on taxis with approval from the local regulator on an ad hoc basis. London has comprehensive guidelines for displaying various types of advertising that apply to all regulated taxis and for-hire vehicles. In California, Chicago, and elsewhere, many drivers of TNCs are clamoring for – and interested in – advertising revenue to supplement their income, so there will be various regulations that are passed on a state and local level, which may vary and contradict one another, making it difficult for companies that are trying to help drivers navigate a web of differing regulations.

To address this ongoing and current issue, the International Association of Transportation Regulators (IATR) is currently working on developing model regulations for digital advertising and product approval processes and certifications. The IATR and its members oversee industries that have too often faced negative impacts from the introduction of new technologies into the market. Currently, there are no standardized guidelines that address the concerns of safety and aesthetics or address offensive or obscene language or content of advertising. Therefore, the IATR and its members are working to develop these model regulations to ensure that the rules governing these new technologies are uniform, and address the policy interests of regulators, drivers, and the riding public.

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Article by Matthew W. Daus, Esq.
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