Wednesday, November 25, 2020
News + Politics State regulators slam Uber

State regulators slam Uber

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Fake cab outfit could lose its license, pay $7.5 million fine; ruling could have a broader impact on the sharing economy

Cab drivers protest outside of Uber HG in SF -- but they aren't the only ones upset by the company
Cab drivers protest outside of Uber HG in SF — but they aren’t the only ones upset by the company

By Tim Redmond

JULY 16, 2015 – In a scathing decision that cuts to the heart of the problems with so-called ride-sharing, an administrative law judge yesterday ruled that Uber should be suspended from operating in California and be fined $7.5 million.

The 92-page ruling by the California Public Utilities Commission’s chief judge, Karen V. Clopton, notes that Uber has failed to demonstrate its compliance with the sorts of laws that apply to all other cab companies, including offering rides to people with disabilities and picking up passengers with no regard to what part of a city they live in.

The judge ruled that Uber, operating as Rasier-CA (a fully-owned subsidy of the corporation), never provided mandated reporting on, for example,

efforts to date for accommodating visually impaired, persons with service animals, and persons requiring a wheelchair accessible vehicle.

Normal licensed cab companies are required by law to comply with the Americans with Disabilities Act, which means that their drivers pick up all passengers, including those who have special mobility or visual needs.

Uber hasn’t shown that it meets that standard. In fact, when the CPUC asked for information on how many rides were offered to people with disabilities, “no actual data was provided,” the ruling states.

Uber also failed to provide numbers by zip code of where drivers were picking up passengers. And it did not satisfy the judge that it was collecting and providing information on driver safety, including how many at-fault accidents its drivers were involved in.

Uber, through its subsidiary, said that it was too difficult to compile that information – a little odd for a tech company that has reams of data on every one of its drivers. In fact, the judge noted:

Rasier-CA’s assertion that the reporting requirements are unduly burdensome, cumulative, and overly broad is undermined by the fact that other regulated TNCs have complied with Reporting Requirements. Additionally, as we discuss, infra, Rasier-CA’s unduly burdensome, cumulative, and over broad objections are factually and legally unsupported.

This doesn’t mean Uber will be shutting down in California any time soon. The decision won’t take effect for 30 days, the company has a chance to appeal – and could resolve the matter by providing the necessary information.

But that information might be embarrassing – it might show, for example, that people in wheelchairs can’t rely on Uber, that people who live in low-income neighborhoods aren’t served by Uber, and that, unlike traditional regulated cab companies, Uber serves only a small slice of the public.

The company, and other similar “ride-sharing” operations, have refused to comply with San Francisco’s taxi laws. Instead, they’ve gone to the state PUC to get licensed.

But now even that agency is apparently concerned that Uber won’t cooperate with regulators. In fact, the vast majority of the $7.5 million fine is for contempt – that is, for refusing to provide information.

It’s part of the pattern of these companies, which have operated for years as if they were above the law.

Uber tried to argue that some of the information is a trade secret, but the judge shot that down quickly:

A trade secret claim cannot be used as a shield to deny access to the very regulatory agency that has ordered the information’s creation and compilation.

There’s a fascinating element to the decision that could impact other “sharing economy” companies like Airbnb. Uber has tried to argue from the start that it’s not a cab company; it’s just a platform that connects drivers with customers. Airbnb makes the same claim: It’s not a hotel company, it’s just an online platform that connects hosts with customers.

The judge didn’t buy it, at all:

Despite Uber’s attempt to distinguish itself from the transportation services by recasting itself as a technology company or a wireless service, the facts are unrefuted, and this Commission has found, that Uber is providing a transportation service as a facilitator.

The ruling makes an attempt to figure out how much money Uber is making, and it’s fascinating. The California subsidiary grossed $40 million, and estimates that Uber’s gross revenue is $3.6 billion, and its net share of that income would be $720 million.

Those figures are not publicly available, because Uber is still a private company.

So now Uber has a choice: Fight this ruling to the bitter end, and hope that the five members of the state PUC will be swayed by politics and lobbying and overturn the judge’s decision – or just pay the fine (modest given the company’s revenue), and start providing the information that the CPUC requested.

We will be watching.

Tim Redmond
Tim Redmond has been a political and investigative reporter in San Francisco for more than 30 years. He spent much of that time as executive editor of the Bay Guardian. He is the founder of 48hills.

43 COMMENTS

  1. Price controls don’t create scarcity, Frobish. Scarcity is created by one of two things, or a combination: too much demand, or not enough supply. Price controls are just one way of responding. Rationing is another. Doing nothing, what libertarians prefer, is yet another. However, doing nothing won’t eliminate the scarcity. You’re still rationing, just rationing by ability to pay, instead of by merit or by luck of the draw. There’s an *apparent* lack of scarcity, but only because the high price has weeded out many, some of whom may need or want or even deserve to have the object of the scarcity more than those who can afford it.

    The libertarian solution, repeated ad infinitum (as Pvt. Hudson stated yet again), is just to create more supply. Well that might be a fine solution when you’re talking about apples or oranges. But when the demand is for space in a 7×7 city, and that demand is effectively infinite relative to the supply, then you simply can’t satisfy that demand in this manner, without destroying the very character of what it is that’s in demand.

    I’m not a NIMBY, whatever that means, but I care about *both* affordable housing *and* neighborhood preservation. If there’s a solution that addresses both those concerns, I’m all ears. Thus far, strengthening rent control is the only solution I’ve heard that addresses both issues.

  2. I guess Uber is for the “sharing economy” so long as Uber gets everybody else’s share. But then what can you expect from a company whose business model is to be illegal.

  3. You mistake me. I am, in fact, not a conservative, I simply think policies should be judged by their outcomes and not their intentions. I actually support rent control and many of the city’s tenant protections, but I acknowledge that, as economists agree – price controls create scarcity. You cannot enact some of the strictest land-use rules and strongest tenant protections in the country (i.e. NYC & SF) without aggressively adding to the housing stock to mitigate the market effects of those policies. High demand does not increase construction costs. Land-use laws and bad policy due.

  4. In practice a cab driver can refuse any fare for any reason. If you look drunk, or sketchy, or ask for a dubious destination.

    A young black male looking for a ride to Hunters Point at 2am is going to struggle to get a cab.

  5. Or perhaps liberal cities are more expensive because they are more likely to have strict zoning laws that make it difficult to build, thereby pushing up the price of existing buildings?

  6. It is natural law that if demand increases but supply does not increase with it, then the marginal price of that asset will rise. That’s not capitalism – it’s just obvious common sense.

    We can pass laws that attempt to mitigate that natural effect, but they tend to suffer from the law of unintended consequences. One obvious example is that those who own properties will be less likely to choose to offer them for rent if those rents (or increases to those rents) are capped, or if it is hard to get a vacancy in the future. We know all this because it actually happens.

    The only real alternative, and one you hint at, is the government effectively nationalising real estate and controlling rents, communist-style. Maybe that works in Cuba and North Korea, but do you really believe the American voter is ready for large-scale socialism like that? Or the American taxpayer is willing to fund such an expensive acquisition?

    There is another alternative, of course. Relax zoning and build a lot of homes. But the NIMBY’s won’t have that.

    My prediction? Nothing will change.

  7. Well Marvin I am actually aware of Flywheel so I guess I was addressing the more historical reasons for not being able to get a cab in the Sunset. Flywheel is fine but it is too late for the cab companies. All of them are dying for lack of drivers and don’t be surprised to see Yellow file for bankruptsy soon now that their clever business ideas wound up with an $8 million judgement the other day due to an accident.
    I would add that I’m not at all sure that everybody in the Sunset is using smart phones so by and large the same problem exists for the majority of customers out there.
    You may have noticed great resistance to Uber’s “you don’t regulate me” approach around the US but not in SF of course. MTA has extracted sixty million from cab medallion sales and now does not lift much more than a finger against the complete deregulation of the taxi industry by the CPUC. Now the pie is cut up so many ways nobody can make much of a living driving people around.
    It looks like the Mayor has told everybody to shut up. I’m guessing he will be amply rewarded for his hands off approach

  8. Some faulty memories below. Before the revolution, cab companies made sure that supply was much less than demand. The drivers loved it. The public hated it.

    The public got its revenge. Unlike in Paris, we had no sympathy for the cab companies.

    Que the counter-revolutionaries with indignation now…

  9. Liberal cities are expensive because they are more desirable and more economically productive than Red State cities. I always find it ironic that Conservatives believe in the free market principles that price determines value except of course for places like Manhattan or San Francisco or Seattle. Texas is cheap for a reason.

  10. Downtown SF to Sunset is an easy $25+ trip. The only time a taxi driver would refuse to go to the Sunset is when his/her shift is almost done and there’s not enough time to make it back.

  11. Boy, you are one clueless bastard. Taxis have apps (such as Flywheel) that do exactly what Uber/Lyft apps do. The early Cabolous app was out before Uber. Taxi apps are all meter based, no shady price surge, and don’tt require users’ credit card info. Where the hell have u been, busy drinking the Uber Kool-aid?

  12. “It is simply the name we give to the natural tendency for prices to rise when demand exceeds supply. That is a universal law for any asset where the price isn’t artificially manipulated.”

    Capitalists want to perpetuate the myth that the consequence of their policies is some sort of natural law. Far from it. It is a conscious policy decision to do nothing to curb exploitation.

    “1) Property owners would decide not to offer their places for rent because it would be insufficiently profitable.”

    Why? As long as there is some profit in it, somebody would step forward to take advantage of it. One owner might decide it’s insufficient, but another might not. And of course we’re still talking about an economy where all property is in private hands. That’s not the only model there is.

    “2) It would increase demand for housing even more because people who desire to live in SF but who are currently put off by the high rents, would instead come here anyway..”

    Yes, but the demand is there anyway. The demand is not one iota less because it’s masked by high prices. But it’s still there.

    “3) It would not be realistic to control the price that properties sell at, so there would be a growing disconnect between the cost of buying and renting.”

    Well, not under the current model. But under a better system, why not? Even as it is, though, a huge part of what’s fueling the rents is the price. One follows the other.

    “Your idea would simply mean that, instead of rationing by price and merit, we would have to ration randomly via some kind of lottery.”

    That’s one way of doing it. It would be more fair. Set a fair rent, and then it’s the luck of the draw. Money does not equal merit.

  13. Small sample size. I’ve had more than my fair share of taxis tell me “no Sunset” when I’ve been lucky enough to flag them down. Getting a taxi when you’re out in the Sunset is a wait that I wouldn’t wish on anyone.

  14. In my experience, the left divides people into categories more, and then goes on to judge one class of people to be better than the other class of people.

    Poor versus rich, tenants versus landlords, criminals versus cops, workers versus bosses, gays versus straights, non-whites versus whites – all those and more are used as the basis of policy. As well as all the examples above that Tin is accused of.

    Perhaps that is because the theoretical basis of much left-wing thought is Marxism, and Marxism explicitly requires that people be divided into classes, because only then do concepts like class struggle and class warfare make any sense.

    The right stereotypes as well, of course. But I don’t think that the right has the same ideological imperative to classify and generalize as the left. In fact, the right-wing political theories often emphasizes the individual, whereas the left-wing ideologies emphasize class.

  15. A taxi to the Sunset from downtown wouldn’t be so hard. Getting a taxi from the Sunset is another matter, as far less taxi’s cruise there looking for fares.

    Two really isn’t a statistically significant sample.

  16. It’s not correct to say that “capitalism responds to shortages by raising prices”. Capitalism doesn’t “do” anything. It is simply the name we give to the natural tendency for prices to rise when demand exceeds supply. That is a universal law.

    I think what you’re trying to say is that the city’s government could (in theory but not in practice because state law wouldn’t allow it) set a maximum rent, such that rents would not rise to the natural level indicated by demand, But even if that were the case, it wouldn’t help, for two reasons:

    1) Property owners would decide not to offer their places for rent because it would be insufficiently profitable. To some extent that happens now anyway, even under a “milder” form of rent control

    2).It would increase demand for housing even more because people who desire to Live in SF but who are currently put off by the high rents, would instead come here as well.

    Instead of rationing by price, we would have to ration by some kind of lottery.

  17. Typically simplistic right wing analysis, Pvt. Hudson. Liberal cities attract people -smart people, creative types, diverse populations… because of their tolerance. All of this contributes to the cultural fabric of the city, but eventually this kind of environment attracts more people than there is space for. And the main way that capitalism responds to shortages is by raising prices. It’s certainly not the only way to respond to shortages, but that’s the way this kind of economy responds. In short, liberal cities become expensive because they are nice places to live. Regulation is merely a tool (albeit an inadequate one, in the context of an overall capitalist economy) to deal with the economic misery caused by rising prices.

  18. Living in the city, I never had much cause to take taxis, but on two separate occasions I actually have taken taxis to and from the Sunset. neither time did I have a problem. Once it was an emergency and I had to flag one down. One appeared in seconds. He drove a little too slowly for my needs, but got me to where I needed to go. Over the years, I’ve spent a lot of time in the Sunset, enough to get the feeling that my two experiences were not aberrations. So I don’t understand this “taxi to the Sunset” meme.

  19. Not being able to get a cab in the Sunset is the fault of Luxor, DeSoto and Yellow cab fighting tooth and nail against a dispatch system that would give the customer the closest cab. How stupid is it to have ten empty Cabs within a mile of the customer that calls X company? In other words call a cab from Pine and Montgomery and see how many empty cabs go by that have no idea you need a ride. The reason is that the rental fora cab is fixed and if a driver picked up no customers at all they make the same profit. MOre profit means they have to have more cabs which dispels and refutes the notion that they were protected against having more cabs. These bastards did not want more efficiency they wanted more cabs and now are hoisted by their own petard.

  20. Yes, it’s a classic chicken-and-egg problem

    Does rent control mitigate high demand or does rent control elevate rents by suppressing the demand to offer homes for rent?

  21. Greg, I think the point is that we all expect liberals to be tolerant. We don’t expect conservatives to be so tolerant – they value more things like freedom, liberty, choice and opportunity.

    So when someone like Tim undermines the one key advantage that liberals have – tolerance – by spending much of his working day listing all the people and things he hates then that is a problem for the very cause he seeks to promote.

  22. I always find it ironic that the most ostensibly liberal cities are always the most un-affordable with the most wealth inequality. Onerous regulation does not in fact help the poor who are so championed by the left. Restrictive land use policies popular in urban liberal enclaves have ensured than the only housing profitable to build without subsidization is luxury.

  23. It’s trolling and you know it. It would be just as easy to come up with a list of things that the mod/corporatists hate, even though they bill themselves as all for “moderation” and “getting things done.”

  24. He appear to think it’s important that people have less choices. And that under-utilized resources should not be shared.

  25. SFO has a point though. In theory the leftist movement is all for tolerance, respect and diversity. But in practice there seems to be a long list of people and things that they hate.

  26. Greg doesn’t remember how hard it was to catch a cab, especially in The Sunset, before the Uber revolution.

    He’s a proud counter-revolutionary.

  27. Ted Redding (and Supervisor Avalos, and Supervisor Campos)

    You hate Uber
    You hate more cross-the-board housing in SF
    You hate gentrification
    You hate that Mid-Market is finally developing after 40 years of neglect and inept old guard supervisors

    You hate techies
    You hate commuter buses
    You hate that SF is growing
    You hate Scott Wiener
    You hate more high rises
    You hate Airbnb
    You hate Mayor Lee
    You hate any kind of sharing economy
    You hate new restaurants

    You hate change

    You won’t take any responsibility in admitting that the old policies of no housing growth and development has led us to our situation today

    You like the bullhorn and everything your way.

  28. Yes, I’m all those 80 year-olds are crying in their i-phones because they can’t use their apps to summon Uber.

  29. “laws that apply to all other cab companies, including offering rides to people with disabilities and picking up passengers with no regard to what part of a city they live in.”

    No honest longtime observer of SF could possibly type this stream of text with a straight face.

  30. Good news. Now all those senior citizens in The Sunset who could never call a taxi because the system was rigged to keep supply much lower than demand can start riding the bus again.

  31. The MTA exists to distribute cash appropriately, any provision of transit or regulation of the transportation realm is purely incidental to the primary mission of cash extraction.

  32. “Uber has failed to demonstrate its compliance with the sorts of laws that apply to all other cab companies”

    The laws are very serious, and need to be enforced strictly – except for Federal immigration law, where complying with the law is a completely optional activity.

    Indeed, ignoring Federal immigration law in order to benefit felons is laudable and should be commended.

  33. You’re right, of course. They haven’t moved nearly quickly enough. Other cities and countries are banning them and arresting their executives, and the PUC could definitely have done much more much faster. But at this point I say give them a chance. The MTA is appointed by Ed Lee, a staunch Uber ally. That would be having the fox guarding the henhouse. Maybe the authorities need a good kick in the pants, a la Paris. That certainly spurred the authorities there to take some action. But at least they’re beginning to do something here as well now.

  34. The PUC has shown itself incapable of handling Uber. Authority over taxi regulation should be put back where it belongs: with the MTA.

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