Thwarted at Legislature, Ride-Sharing Companies Uber and Lyft Face State Fines

Cronkite News Service

PHOENIX – Ride-sharing companies Uber and Lyft contend that their smartphone-based services connecting Arizona riders with drivers who use their personal vehicles are more convenient than taxis.

But a state official says that if the companies want to continue operating here they will have to abide by the same regulations as taxi companies. And drivers will be cited if they don’t, he adds.

“Currently, the way that they are operating, if they are not licensed with us, if they don’t have a weights and measurements license, if they don’t have commercial insurance, commercial registration, then they are not in compliance with state law,” said Shawn Marquez, director of compliance with the Arizona Department of Weights and Measurements.

The two companies pushed unsuccessfully this legislative session for a law they argued would acknowledge the different way they do business but that taxi companies said wouldn’t be fair.

At issue is when the independent drivers who provide rides through Uber and Lyft must be covered by the $1 million in insurance coverage the companies provide.

Taxi drivers in Arizona must have coverage of at least $300,000 for vehicles carrying eight people or less as well as $300,000 in case they are in an accident caused by an uninsured driver. That coverage applies anywhere a taxi operates, but Uber and Lyft argued that their coverage should only apply when the drivers it works with are carrying passengers or on their way to pick them up.

A bill that would have allowed Uber and Lyft to operate that way made it through the Legislature but was vetoed by Gov. Jan Brewer, who said in her veto letter that the change would interfere with safety.

“Consumer safety must not be sacrificed for the sake of innovation,” the letter said.

Now drivers for Uber and Lyft will have to comply with state regulations or face penalties unless the companies find some other solution – something representatives for both said they hope to do.

Paige Thelen, a spokeswoman for Lyft, said the company will continue to work toward a solution.

“We’re still evaluating our options,” she said. “We’re going to continue to stand firm in the community and do everything we can to ensure that there’s a path forward that allows rise-sharing to thrive in Arizona.”

Steve Thompson, general manager for Uber Phoenix, emailed a statement from Uber Technologies saying the company would also continue to work with the state.

“Uber will work in the coming months with the State of Arizona to find a permanent home for ridesharing – because the people have spoken, and we’re listening,” the statement said.

Lyft has operated in Phoenix since September 2013 and launched in Tucson in April. Uber was founded in San Francisco in 2010 and has operated in Phoenix since November 2012. It expanded to Tucson in October 2013.

Customers can request a service from Uber or Lyft by downloading the companies’ apps on to their smartphones and creating an account that connects a rider’s credit card. A potential rider can then request a ride.

Drivers choose who to give trips to through the app. Both the rider and the driver can see the others profile picture, name, phone number and rating before the ride even starts. After the trip, riders and drivers can rate each other, from one to five stars. Drivers must maintain a 4.6 average rating out of five stars and can make up to $20 an hour.

Thompson said the company has received opposition from taxi companies in every new market because the transportation industry isn’t innovative.

“Try to think of the most innovative thing that a taxi has done in the last few decades expect maybe requiring a credit card terminal that maybe works sometimes,” he said.

Mike Pinckard, president of Total Transit, the parent company of Discount Cab, said Uber and Lyft need to obey the law.

“All we ask is that they insure their vehicle just like a pedicab is required to be insured, just like a taxicab is required to be insured, just like a limousine, a livery vehicle, a sedan or any other for hire vehicle,” he said.

At a committee hearing on the bill, Kathleen Noble, an Uber and Lyft driver, said she would have to find another part-time job if required to pay the $5,000 premium for commercial insurance for her car.

“It’s just too expensive,” she said. “To bar our company, companies like Uber, is like barring Facebook because you’re worried about keeping the telephone companies in business.”

Sindee Peck, director of the Center for Entrepreneurship at the W.P. Carey School of Business at Arizona State University, said that disruptive innovations like Uber and Lyft are essential to a community’s economy.

“Anywhere where you have free market activity where people are creating new ways to earn money and provide services is better for our economy,” she said.

She said it’s not uncommon for lawmakers and regulators to push back against innovative technology.

“You see this in all kinds of industries frequently,” she said. “When innovation happens there’s a first push of those people and places that are quick to embrace it and then there’s the extensive pushback from policymakers and regulators to keep people safe and often, unfortunately, to keep the incumbents from having to deal with this innovative, either technology or new service offering.”

But for now, Uber and Lyft will have to obey the law or face the consequences, Marquez said.

“We have already been … citing them and doing our job as we have been doing for years and years and years,” Marquez said. “And if we run into them again we will cite them, absolutely.”

The rules:

To operate a taxi, limousine or livery service in Arizona:

• Obtain a license and a decal from the Arizona Department of Weights and Measurements for a fee of $24 per vehicle per year.

• Complete a free vehicle inspection from the agency.

• Obtain a minimum commercial insurance of $300,000 for vehicles with seating capacity of eight passengers, including the driver; $750,000 for vehicles with a seating capacity less than 16 passengers; or $5 million for vehicles with a seating capacity of 16 passengers or more.

• Pass a criminal background and drug test.

• Provide the department any records of vehicle maintenance.