An article that ran in the Feb. 1 issue of Crain’s New York Business blames inconsistent licensing practices and lax enforcement of regulations by the New York City Taxi & Limousine Commission (TLC) for allowing app-based car companies like Uber and Lyft to expand in the city at the expense of traditional For-Hire Vehicles (FHVs) and Taxis. The TLC regulated Uber and Lyft as if they were Black Car cooperatives – a designation at odds with their operational model – giving them an advantage over the Taxi industry and allowing them to capture a disproportionate share of the city’s transportation market, according to a Taxi Medallion Task Force report commissioned last year by City Council.
The TLC issued licenses for approximately 2,000 FHVs per month in 2018, even as Taxis were capped by law at 13,587. The overwhelming majority of the 130,000 FHVs added to city streets were app-hail cars.
“Uber and Lyft had been given an unfair advantage to the point they were able to grab market share,” said Steven Shanker, attorney for the Livery Round Table. “The TLC’s failure to act, especially when these things were pointed out to them, led them to take market share away from legitimate businesses who were playing by the rules.”
From 2011 to 2018 more than 100,000 app-based vehicles entered the city’s streets, and their rapid growth would not have occurred without the consent of the TLC, the report found.
“[The TLC] supported a system that grew in value over time, and then they allowed it to collapse,” said Kenneth Tuch, a lawyer who filed an antitrust complaint against Uber in 2014. “The TLC changed the rules, and they changed the interpretation of the rules to serve the new model, Uber.”
New York’s transportation industry had been heavily regulated for decades when Uber entered the market. Taxis held the domain of street-hail pickups, while prearranged rides were the province of Black Car, Livery, and Luxury bases. Uber, the TLC decided, should be licensed as a Black Car company, since its trips were cashless and “prearranged.” TLC rules state that Black Car bases are either owned by franchisees of the base or are members of a cooperative that operates the base.
“They don’t meet any of the qualifications of being a cooperative,” said Christopher Lynn, TLC chairman from 1996 to 1998. “They’re not a Black Car. Their vehicles are not assigned to a specific base and dispatched.”
Legal reform in 2018 required Uber to be qualified as High-Volume For-Hire Vehicle (HVFHS) services, to document the number of trips arranged and dispatched through a particular base, as well as the projected number of vehicles needed to operate the base and the geographic areas the HVFHSs intended to serve. But according to documents submitted by Uber to the TLC for approval of its HVFHS license, the company has only two base locations in the city. One of them, at 636 W. 28th St., is a former Uber office, listed as the site of 27 of its 29 LLC base companies. The building has been empty much of the year, undergoing renovations. Uber also has a base in Long Island City. It’s said to be transitioning the other bases to 3 World Trade Center, where it is moving its headquarters.
Transportation lawyer Daniel Ackman argues that the business model of the app-based companies is antithetical to the use of an actual base.
“To have a base means you dispatch from a base,” Ackman said. “They don’t dispatch from a base. They dispatch from cyberspace.”
Ackman characterized Uber’s process as allowing its drivers to get Black Car licenses even though they don’t comply with the licensing rules. The same licensing contradiction plagues Lyft, which also rapidly expanded in the 2010s.
A 2019 affidavit from Matt Rodrigues, Lyft’s New York City market manager, said that two Lyft LLCs – Endor and Tri City – were twice approved to be licensed by the TLC as Black Car bases, even though they hold no such distinction as either a franchise or a cooperative.
“They weren’t lawfully licensed as bases,” Lynn said, disputing the TLC’s assertion that they were lawfully licensed, before becoming HVFHV bases. “They were not Black Cars. They were not Limousines. They were not Luxury cars. They were none of those things. That’s the whole point of Local Law 149.”
Aside from licensing issues, there is the question of the TLC’s connection to the unprecedented growth of the ride-hail companies. A class-action lawsuit filed in state Supreme Court in 2017 accuses the TLC of violating the city’s covenant of good faith and fair dealing in its oversight of the taxi medallion market. Ackman, one of the lead attorneys on the case, argues that prior to a medallion auction, the TLC published false or misleading information regarding prices and that the agency caused their value to plummet after permitting up to 90,000 ride-hail vehicles to enter the market by issuing them Black Car licenses for which they did not qualify. Ackman’s legal challenge follows similar action taken six years ago by Kenneth Tuch, whose firm, Tuch & Cohen, accused Uber of making “material misrepresentations.” He charged that the TLC abdicated regulatory responsibility in a 2014 complaint sent to the attorney general office’s Antitrust Bureau.
Last year, Attorney General Letitia James sued the TLC for $810 million, accusing the city of fraud in artificially inflating medallion values.
Ackman’s two lawsuits against the TLC are tied up in court – one is seeking reconsideration and appeal; the other is pending in Queens court.
Taxi fleet owners are furious that the city has allowed the tech companies to operate virtually unchecked.
“In this way, they were able to add the additional 85,000 cars to our streets – which in turn led to pollution, congestion, driver poverty, increased crashes, and less use of public transportation,” said Carolyn Protz, a taxi medallion owner.
There is no denying that Uber and Lyft’s business model is popular with customers, but there were regulatory questions as to whether the prearranged action of requesting a car via a cellphone app counted as a traditional on-demand street hail, which was always the domain of taxis.
By the mid-2010s, the TLC punted its duties as regulator to City Council.
“They were bringing in 2,000 vehicles every week, and there’s no way these drivers could make a living,” said Meera Joshi, TLC chairwoman from 2014 to 2019. “We told City Council the way the law is written, the agency couldn’t regulate it.”
Following a failed attempt at regulation in 2015, City Hall passed a reform law in 2018, in an attempt to rein in Uber and Lyft. But as Crain’s reported in 2020, the TLC did not implement the law for nearly two years.
New TLC documents provided to Crain’s after a Freedom of Information Act request demonstrate the extent that Uber and Lyft have expanded across New York as City Hall and the TLC vacillated on how to regulate the companies. In 2017 alone, Uber cars traveled nearly 35 million miles across Midtown’s four transportation zones, including 8.4 million miles of cruising without passengers.
In the face of allegations of impropriety, Uber has argued it has followed TLC rules and regulations. They point out that they submit data to the TLC weekly, including daily trips [and] that includes when drivers log on and log off, so they understand the utilization.
Lynn alleges that the TLC violated the Haas Act of 1937, which established the medallion system’s framework.
“Under the mandate and under the law, they had to protect the integrity of the franchise of the yellow cab. You keep the value of the franchise high,” Lynn said. “You don’t let people dilute the value of the franchise by calling themselves a Taxi.”
Source: Crain’s New York Business