April 2015 - Transportation Network Companies

Transportation Network Companies: What Are They and Why Regulate Them?
By Claire Silverman, Legal Counsel, League
Wisconsin municipalities are empowered to act for the public health, safety, and welfare and may carry out their powers by “license, regulation . . . and other necessary or convenient means.” Although municipal ordinances licensing and regulating for-hire vehicles like taxis and limousines are not uncommon, many municipalities are realizing their ordinances are outdated and considering whether they need to be updated in light of new and emerging technologies.
Across the country, local governments and some states have been grappling with how to regulate Transportation Network Companies (TNCs). TNCs are companies that use an online-enabled platform, such as smart phone technology, to connect riders and drivers in real time. Drivers and passengers connect through an app; drivers can log on when they are headed somewhere or when they have time to drive and are looking to make some additional money. For riders, TNCs can be an attractive option because the rider has the ability to see cars in the vicinity, connect with a driver more quickly than they might be able to through traditional taxi dispatch, and enjoy the convenience of seeing the fare ahead of time and paying via credit card information stored in the app. Uber, Lyft and Sidecar are perhaps the best known TNCs. These companies, particularly Uber, have been in the headlines with increasing frequency and are the subject of much litigation.
TNCs claim that they do not provide transportation services and therefore are not subject to for-hire vehicle regulations. TNCs claim that they are simply a “technology platform.” The contract that passengers must accept before accessing or using Uber’s services provides that the services constitute a “technology platform” that enables users of Uber’s mobile applications or website to arrange and schedule transportation and/or logistics services with third party providers. . . . ” and requires the user to “acknowledge that Uber does not provide transportation or logistics services or function as a transportation carrier.” Municipalities disagree.
Although the push to regulate TNCs frequently comes from the licensed taxi companies that are subject to regulation and who argue that regulation or prohibition is necessary to level the playing field, local government bodies exploring the safety and fairness issues raised by TNCs, often conclude regulation is necessary or desirable.
Briefly, here are some of the issues raised by TNCs:
Passenger Protection/Safety
Municipal ordinances licensing taxis and limousines often require certain things for the safety of passengers. These include regulation of drivers (e.g., background checks, fingerprinting, ensuring and requiring drivers are properly licensed, zero tolerance drug policy, limiting the number of hours drivers can drive, requiring the keeping of a log of rides provided), vehicle requirements (e.g., requiring regular vehicle inspections, ensuring the vehicle is recognizable to passengers), and requiring drivers to carry adequate insurance. TNC drivers often use their personal cars. Since personal car insurance typically contains an exclusion for commercial use, the driver’s insurance will likely deny coverage when passengers are carried for afee. Taxi services typically have to have a minimum amount of commercial liability insurance and vehicle insurance. Municipal regulations also typically require rate transparency and prohibit price gouging during peak times. These types of regulations are important to protect passengers using a TNC’s services.
The contract that passengers have to accept to use Uber requires them to waive any and all liability, damages, jury trial and other rights as a condition of using Uber. Additionally, the contract provides that “Uber does not guarantee the suitability, safety or ability of third party providers” and requires passengers to acknowledge that they “may be exposed to situations involving third party providers that are potentially unsafe, offensive, harmful to minors, or otherwise objectionable.”
Provision of Service and Fairness Issues
Taxi services are often subject to certain service requirements. For example, some municipalities require that taxi services operate during certain hours and on certain days of the week (highly populated municipalities often require that taxi companies provide service 24 hours a day, seven days a week). Additionally, many municipalities require that taxi service be provided to all areas of the municipality to ensure areas serving minority populations and lower income residents are served. Finally, municipal ordinances also frequently address the need for taxi services to provide a certain number of vehicles that can accommodate passengers with disabilities. If TNCs can essentially “cherry pick” fares, enjoying all the benefits of providing rides without having to shoulder any of the regulatory burdens licensed cab and limo companies are at a significant disadvantage and it can undermine the ability of the licensed companies to provide fair and reasonably priced service in the municipality. Moreover, it acalls into question the necessity of the regulations and licensing scheme of other for-hire passenger vehicles since TNCs present the same concerns.
Sample TNC regulations
Many municipalities have recently amended their for-hire vehicle ordinances to include TNCs. Sample ordinances include Seattle, Chicago, Milwaukee and New York. Samples can be found searching the web or by contacting the League office.
Licensing and Regulation 396
   1.  The power to act for the health, safety, and welfare of the public is often referred to as the “police power” and is found in the statutes setting forth home rule powers for Wisconsin municipalities. See Wis. Stat. secs. 61.34 (villages) and 62.11(5) (cities).
   2.  New York, Chicago, Seattle and Milwaukee are some of the cities that have recently adopted ordinances regulating TNCs.
   3.   See “The Transportation Network Company Litigation Explosion,” Daus and Le Veaux, Municipal Lawyer, Nov./Dec. 2014, vol. 55, No. 6 at pp 14-17, detailing the claims against TNCs. The article explains that lawsuits against TNCs fall into three main categories: 1) Injured passenger/bystander suits; 2) suits by drivers against the industry; and 3) government actions against TNCs.