Column: A high-tech hub just voted to call Uber’s bluff on tougher regulation

The business model of companies like the ride-matching services Uber and Lyft is based on flouting regulations that taxi companies and other competitors have to meet. So when the the city council of Austin, Texas, voted last year to mandate fingerprint checks for the services’ drivers, Uber and Lyft tried to bully the city into backing down.

They lost.

A ballot measure cooked up and financed to the tune of $8.7 million by Uber and Lyft got voted down Saturday, 56% to 44%. The measure, Proposition 1, would have allowed the services to self-regulate by repealing the city’s ordinance. The texts of Proposition 1 and of the city’s ordinance are here.

Disappointment does not begin to describe how we feel about shutting down operations in Austin.

— Chris Nakutis, Uber general manager in Austin

The irony of Saturday’s vote is that Austin is a Silicon Valley wannabe, so it was expected to take Silicon Valley’s approach to regulation: that rules are for other guys, not for companies determined to change the world.

Proposition 1 would have repealed the City Council’s vote imposing a raft of regulations on transportation companies like Uber and Lyft. In addition to fingerprint checks, the city ordinance requires that all vehicles display a “distinctive emblem” while they’re operating, prohibits loading and unloading passengers in a travel lane, requires that passengers get an advance estimate of their fare before entering the vehicle, and bars “surge pricing” during certain emergencies, including “extreme weather, major electrical outages, civil disorder or military action and national or local emergencies.”


The companies’ spending on Proposition 1 swamped the opposition, which raised only about $130,000. Additionally, the companies threatened to pull out of Austin starting Monday if their measure failed. They appeared to be sticking with their threat, suspending service in Austin as of Monday morning. Customers with Uber and Lyft apps on their smartphones got messages Monday saying the services weren’t operating.

“Disappointment does not begin to describe how we feel about shutting down operations in Austin,” said a statement attributed to Chris Nakutis, Uber’s Austin general manager. “For the past two years, drivers and riders made ridesharing work in this great city.... We hope the City Council will reconsider their ordinance so we can work together to make the streets of Austin a safer place for everyone.”

That reflects Uber’s customary approach to local officials who have the temerity to demand that the company comply with safety rules and regulations: ignore the rules until the municipality knuckles under. If that fails, then pledge to “work together.” For his part, Austin Mayor Steve Adler tweeted Saturday that “Uber & Lyft are welcome to stay & I invite them to the table regardless.”

State and municipal officials take with a mound of salt the services’ representations that their own safety checks are good enough and that further rules are “duplicative.” That’s because the services’ performance thus far has been questionable.

In a 2014 lawsuit, the district attorneys of Los Angeles and San Francisco alleged that Uber misrepresented its background checks, which weren’t nearly as rigorous as it claimed, despite its charging a “safe rides fee” of $1 per passenger, ostensibly to cover the cost of its program. (Lyft settled a similar complaint from the prosecutors by changing the language of its background-check claim and paying a penalty of $500,000.)

The district attorneys found that “in Los Angeles alone, registered sex offenders, a kidnapper, identity thieves, burglars and a convicted murderer had passed Uber’s ‘industry leading’ background check.” The absence of a fingerprint check alone dropped Uber’s standard below that of taxicab companies, which are mandated in California to run fingerprint checks on drivers. Experts say fingerprint checks are a crucial part of any driver-vetting process because they verify that the records retrieved in a background check actually belong to the driver.

Uber settled the lawsuit last month for up to $25 million. Earlier, the company had settled class-action complaints over the “safe rides” fee by paying $28.5 million to 25 million drivers. Uber gets to keep charging the $1 fee, but agreed to rename it a “booking fee.”

It’s unclear what impact the Austin vote will have on Uber and Lyft outside the city limits. State and local officials have tended to fold when confronted with the company’s truculent attitude toward regulation, in part because they fear that the public overwhelmingly supports the services. Austin is a signal that public support isn’t necessarily wholehearted. Voters like the convenience and the (sometimes) lower fares offered by Uber and Lyft. But plainly they’re uneasy about the safety of drivers who may not be adequately vetted by companies whose interest is largely to get cars on the road. That should have been clear to political leaders already, but now the proof is inescapable.

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