Excessive Regulation, Not Lyft, Needs To Stop Operating In St. Louis
Not long ago, stores such as Blockbuster rented out movies across the nation. Where are they now? Gone, “unwept, unhonored, and unsung,” as former customers stream “House of Cards” on Netflix. But imagine that 10 years ago Saint Louis had a regulatory body, staffed with video store owners, which controlled the supply of video stores and set rental prices. Imagine that this regulatory body tried to block Netflix from streaming in Saint Louis, claiming it flouted the law and was not competing on a level playing field.
That story may seem preposterous, but we are dealing with a very similar situation today as Lyft, a new ride-sharing app (smart phone-based application), has upset the highly regulated Saint Louis taxicab market.
Lyft, Uber, and other companies like them allow users to schedule a ride from any registered driver in a geographical area. Lyft drivers need not be full-time cab drivers; they can be anyone with virtually any type of car that passes certain background and safety tests. After using Lyft, riders make an optional donation — not regulated fare — to the driver via electronic payment. No cash is needed. Drivers and riders rate each other, incentivizing both elevated service from drivers and generous rider donations. Lyft and other apps are rapidly expanding across the country and have many happy customers where they exist.
Not everyone is happy, however. Chief among the protestors is the Saint Louis Metropolitan Taxicab Commission (MTC), which regulates all for-hire vehicles in Saint Louis City and County. Under the argument of protecting rider safety and maintaining a balance between cab supply and demand, the MTC controls the number of taxis in Saint Louis, how they can conduct business, and what prices they charge. The MTC has taken legal action against Lyft, successfully pursuing an injunction against the company and directing police to fine drivers.
In the past, one could have argued that potential taxi users had too little information to avoid being ripped off, and no way to know which company was safe, so regulation was necessary. Today, the ease of checking fares and cab company records over the Internet and smart phones has solved those problems, but regulatory bodies such as the MTC have not gotten the memo. The MTC controls fares, requires potential cab owners to maintain a commercial address, and gets to decide — in a strange central planning throwback — if there is enough demand to justify more cabs.
These policies cause a significantly reduced supply of cabs when Saint Louisans need them most, such as on New Year’s Eve. Last year, there were less than 800 on-call cabs in all of Saint Louis City and County, and many decided that the fixed fare they would receive was not worth the hassle of working on New Year’s Eve. With no other options, many would-be customers waited hours for taxis that did not come.
Lyft and other ride-sharing apps can allow for a massive increase in the for-hire vehicle supply in Saint Louis. People in Saint Louis would be able to use some of the excess capacity of the cars we already own to greatly increase mobility in the Saint Louis area.
As for regulation, states such as California have already brought services such as Lyft into an established legal framework, called a Transportation Network Company. Companies such as Lyft can operate as long as they ensure that drivers have adequate insurance, clean records (in driving and otherwise), and safe vehicles. That seems like a fair set of regulations for Lyft’s operations in Saint Louis. In fact, it seems like a fair set of regulations for anyone who wants to give people rides in Saint Louis.
New business models relegate some regulations and regulatory bodies to the dustbin of history. If the MTC cannot change its policies to accommodate innovative companies, the MTC, not Lyft, should cease operating in Saint Louis.
Joseph Miller is a policy researcher at the Show-Me Institute, which promotes market solutions for Missouri public policy.