Mobility Lab’s investigation into legislation on transportation network companies across the country found a concerted effort by Uber and Lyft to limit local authority.

When Uber first appeared in San Francisco, it was called UberCab – despite being unapproved by the San Francisco Metro Transit Authority (SFMTA), which regulates taxis in the city. In response, the SFMTA issued a cease and desist order.

Although they dropped the “Cab,” Uber continued to operate, claiming that the existing regulations did not apply to their business model. Now, eight years later, every state except Oregon has at least some statewide regulation over transportation network companies (TNCs), the industry term for Uber and Lyft.

While it is no longer the Wild West for TNCs, this obscures the more complicated picture of regulation. The passage of statewide rules reflects a nationwide effort by TNCs to dodge often stricter regulations imposed by city and county authorities, we found in our investigation of TNC legislation.  Across the country, Uber and Lyft lobbied state legislatures to pass laws that override local regulation and leaves them far less regulated than other livery companies.

In most states, regulation of taxis and often other for-hire vehicle services like limousines and private shuttles, has been left to local governments since taxi regulation got underway in earnest during the 1930s. States became interested in regulating the emerging market when the California Public Utilities Commission defined the term TNC and placed it under the jurisdiction of the Commission as a charter-party carrier in 2013, taking the regulation of Uber out of the hands of the SFMTA.

In 2014, Colorado became the first state to pass statewide legislation authorizing TNCs through a regulatory framework preempting any future municipal or county regulation. Most recently, Vermont passed a bill in June with the legislature saying it intended the bill to be “a step toward” uniform regulation across the state. The legislation preempts local authority to regulate TNCs but includes an exemption for the city of Burlington that is set to expire in 2020 following a study of how the industry should be regulated by the state and how those regulations would impact existing municipal regulations.

In addition to Vermont, other states have passed state-wide regulations on TNCs that preempt local authority but include caveats for major cities. New York, Pennsylvania, Maryland, and Nevada’s TNC regulations include specific regulatory authority for New York City, Philadelphia, Baltimore, and Las Vegas respectively. Additionally, while the states of Alaska and Alabama do not allow local governments to regulate or tax TNCs, municipalities or counties can ban them if they choose. Unlike Vermont, these exemptions are not set to expire.

With Vermont’s bill last month, Oregon is now the last state to not have any statewide law regulating TNCs. But it is not for lack of trying – on the part of the TNC industry.

While it might seem counter-intuitive for the companies to push for regulations on themselves, it makes perfect sense given the fact that the preemptive state-wide regulations that have been passed are generally more relaxed then city ordinances, which often attempt to regulate TNCs with a framework similar to taxi-cabs. The National Employment Law Project (NELP) detailed this process which they call “state interference” in a report released earlier this year. The NELP frames this as a specific adoption of a tactic made popular by conservative groups such as the American Legislative Exchange Council to combat local regulations.

The push for state-wide regulations in Oregon came on the heels of a spat between the city of Portland and Uber. In 2014, Uber began operating illegally in the city, but after hiring an influential lobbyist and agreeing to suspend services for several months as the city hashed out new regulations, the company began operating in the city legally.

Three years later, however, the relationship soured when the New York Times broke the story that Uber was using a program called “Greyball” to detect and flag city regulators. Uber used the program to stop regulators from cracking down on the company by sending ghost cars and canceling rides with real drivers. In response, city officials opened an investigation into Uber and Lyft. This revelation effectively tanked the pending legislation in Salem that would have legalized TNCs state-wide, preempting local laws – including Portland’s.

The failure of the bill in Oregon, however, is an outlier. The Texas A&M Transportation Institute (TTI) notes that as of August 2017, 33 states explicitly preempt local regulation and seven additional states partially preempt local authority to some degree.

The most high profile instance of state preemption was the Texas law that saw the return of Uber and Lyft to Austin. The two companies had pulled out of the city in protest of local regulations requiring fingerprint background checks for TNC drivers. The state law that preempted the city’s authority did not.

Local regulations are often better: they better serve the public interest than the relaxed state-wide rules.

State regulation of the TNC industry is not necessarily bad. With no statewide rules in place, companies cannot legally operate except where local government institutes a regulatory framework. One of the biggest regulatory holes is insurance requirements, as TNC vehicles fall into a grey area between personal and commercial vehicle insurance. Every state except Oregon has passed legislation that requires TNCs or TNC drivers to purchase specific insurance. For several states, this is the only statewide regulation of the industry.

Statewide rules can also add common-sense simplification like a recent law in California that made it so that TNC drivers only needed one business license. Before the law, drivers might have had to get a separate license for every individual jurisdiction they drove in.

Critics of taxi laws are often correct in pointing out that blindly applying taxi rules to TNCs doesn’t always make sense. Ride-hailing services are an important piece of the transportation puzzle and TNCs promise to improve on many of the failings of the taxi industry.

However, many of the rules that Uber and Lyft attempt to circumvent are vital in ensuring equitable service and the ability of local governments to properly plan. States do not need to preempt local rules to introduce sensible TNC regulation. Local governments are often better equipped with local knowledge and experience to craft effective regulation. Many cities have established a better framework than the states have or would.

New York City is currently leading the charge on requiring TNCs to provide timely rides to passengers requiring a wheelchair-accessible vehicle. Most state laws require only that users be able to indicate on the app that they require an accessible vehicle but do not require the company to actually provide any vehicles. Portland also has specific language that requires TNCs provide wheelchair accessible service “within a reasonable time.”

Data collection is another important avenue of regulation which state rules often exclude. Knowing how many drivers operate in a city and where trips are taking place is important information for city planners to understand the effect TNCs are having on the city and whether they are contributing, positively, negatively, or neutrally, to public transportation ridership.

So far, only cities have pushed for TNCs to surrender data. In Seattle, the city wanted more information about how much money drivers were making. Uber claimed that their drivers were making above the minimum wage, so the city asked the company to back up the claim. While the resolution is non-binding, the city raised the possibility of a binding data-sharing agreement and increasing minimum fares.

In New York, regulators needed to know how the companies were providing wheelchair-accessible rides. States typically only require access to data in response to specific ride complaints or for audits of random samples of driver data to ensure compliance with other regulations. TTI reports that only six states have more-extensive data sharing agreements, many dealing with the availability of wheelchair-accessible rides and hours logged by drivers to check compliance with state regulations.

Meanwhile, Portland TNC regulation has a detailed data sharing requirement that would have been nullified by the state law, which did not have such a requirement.

TNC advocates often argue that preemptive state rules are necessary to simplify a patchwork of local regulations, yet those local regulations are often better: they better serve the public interest than the relaxed state-wide rules. Lobbying state governments in the name of simplification is a path for TNCs to dodge sound regulations by locally elected governments and politicians. Though it may make business for Uber and Lyft easier, it is worse for the rest of us and further subverts local government.

Photo by Sam Kittner for Mobility Lab.