Sharing app or regulation Hack(ney)? Defining Uber Technologies, Inc.

• Author: Elliott, Rebecca Elaine

1. INTRODUCTION TO THE SHARING ECONOMY AND UBER TECHNOLOGIES II. BACKGROUND ON TRANSPORTATION REGULATION, UBER, AND ANTICOMPETITIVE LEGISLATION A. History of Transportation Law B. Transportation Law Today 1. Common Carrier 2. Contract Carrier 3. Transportation Broker 4. Telecommunication Carriers and Information Service Providers C. The Uber-App's Operation D. Federal Trade Commission and State Unfair Competition Acts E. Uber's Legal Challenges III. ANALYSIS A. A Helping Friend B. Independent Contractor C. Information Service D. Dangers of Allowing Uber's Mode of Current Operation 1. Service Lacks Comparable Consumer Protection 2. Anticompetitive 3. Predatory Pricing E. Problems with Attempting to Regulate Uber IV. RECOMMENDATION A. Cities Should Open Up More Licenses for Taxi Drivers and Modify the Regulatory Burden on Taxi Drivers B. Uber and Other App-based Companies Should Operate Within the Applicable Regulatory Framework While Working Alongside Legislators to Form a New Regulatory Framework C. Regulations Covering TNCs Should Be Made on a Larger Scale for Consistency and Uniformity D. Legislation Should Be Adopted that Will Better Embrace Innovation, Account for Public Opinion, and Maintain Reasonably Safe and Trustworthy Public Transportation E. As a Practical Mechanism for Enforcement of Regulations, TNCs Should Be Held Responsible for Any Failure by Its Drivers to Follow Regulation V. CONCLUSION I. INTRODUCTION TO THE SHARING ECONOMY AND UBER TECHNOLOGIES

   "Sharing Economy" is a newly coined term for an ancient economic system (1) embracing "community ownership," efficient use of resources, scaled-back consumption, and "localized production." (2) In a Sharing Economy, many small-scale sharing ventures do not aim to profit from a resource but instead aim to offset the cost of ownership by sharing and allocating resources. (3) Recently, new app-based companies have popularized the term to describe their business model. (4) By defining themselves as Sharing Economy companies, the app-based businesses not only represent themselves as economically efficient, but they also bypass regulation. (5)

   Using Uber Technologies, Inc. (Uber), a multi-national company that connects riders and drivers through a smartphone application (app), (6) this Note explores the impact of the Sharing Economy model on the business and regulatory environment. Uber is illustrative because the company is currently facing multiple legal hurdles. (7) For example, Germany, Spain, Italy, and France either have or have nearly banned Uber nationwide. (8) Domestically, various states and municipalities have struggled to define Uber's innovative model under their traditional regulatory frameworks. (9) After addressing the regulatory landscape, this Note asserts that app-based companies should be identified according to the service that they administer, a new uniform framework should be established to balance innovation with public interest, and app-based companies should cooperate with regulators in developing that framework.

2. BACKGROUND ON TRANSPORTATION REGULATION, UBER, AND ANTICOMPETITIVE LEGISLATION

   This Part discusses a) the history of transportation law, which shaped our current regulatory framework, and b) the relevant ways legislators label business types to associate carrier regulations. Additionally, this Part reviews c) the Uber-app's operation to understand why legislators struggle to label uber for regulation, and d) the laws that regulate anticompetitive practice. Finally, this Part examines e) the steps some legislators have taken in the wake of Uber's current legal challenges.

   1. History of Transportation Law

      The conflicts that led to transportation law mirror the conflicts between Uber and taxi companies today. (10) The history of American transportation regulation traces back to early England. (11) The Watermen, i.e., sea ferries, provided the main source of for-hire transportation in England prior to 1640, when hackney coaches began to replace them by offering lower prices and greater convenience. (12) With the increase in coaches came concerns for safety. (13) In response, King Charles I ordered early weight and vehicle width restrictions. (14) Another drive for regulation, however, came from competing businesses. (15) The Watermen experienced a tremendous loss of profit from the increased competition. (16) Anti-innovators joined the Watermen's protest opposing the coaches and calling them:

      one of the greatest Mischiefs that hath happened of late Years to the Kingdom, mischievous to the Publick, destructive to Trade, and prejudicial to Lands: First, By destroying the Breed of good Horses, the Strength of the Nation.... Secondly, By hindering the Breed of Watermen, who are ... the Bulwark of the Kingdom. Thirdly, By lessening his Majesty's Revenues. (17) In 1635, the King "expressly command[ed] and forb[ade] that no Hackney or hired coach be used or suffered in London, Westminster, or the suburbs thereof." (18) The Watermen did not celebrate for long, however, because by 1685 the King had removed the injunction and hackney coaches were recognized and regulated like the Watermen. (19)

      With the exception that automobiles replaced horse-drawn carriages, the New York City taxi industry in the 1900s remained largely unchanged since 17th-century England. (20) Although cities and states required taxi drivers to apply for licenses, the industry was mainly unregulated. (21) Then came the Great Depression, and with it "wildcat" cars. (22) Wildcat cars--unlicensed taxis driven by laid-off workers who dramatically lowered fares--took business away from the taxi industry. (23) In 1937, in response to violence and the quickly diminishing taxi industry, legislators passed the Haas Act which established the medallion system (24) and the transportation law currently in effect today.

   2. Transportation Law Today

      Current transportation regulation addresses Common Carrier and Contract Carriers separately. (25) Some city legislators have distinct regulations for transportation brokers. (26) App-based technology may also fall under telecommunication carrier regulations or exemptions. (27)

      1. Common Carrier

         Generally, a Common Carrier is any transportation service that is open to the public, without prejudice and for compensation. (28) The service may be either direct or indirect, part-time or full-time. (29) Most cities have two main types of Common Carrier regulations: taxi regulations and For-Hire Vehicle regulations. (30)

         All cities license and regulate their taxi industry, and generally define a taxi as a vehicle "bearing a Medallion indicating that it is licensed by the Commission to carry up to five passengers for hire and authorized to accept hails" from persons in the street. (31) Because most cities cap the number of medallions issued, the system only allows for a set number of drivers per city. (32) In New York City, each medallion was estimated to be worth up to $1.3 million in 2013. (33)

         As a condition to licensure, taxi drivers submit to background checks (34) and pass language and driver tests. (35) The car must undergo extensive annual (36) and quarterly safety inspections (37) and conform with specific labeling. (38) The regulations also fix prices, (39) require financial reporting, and mandate meters to calculate fares. (40) By failing to comply with lists of regulations, taxi drivers risk heavy fines and the loss of their license. (41)

         Cities often define For-Hire Vehicles (FHV) as licensed vehicles, driven for compensation with "a seating capacity of 20 or fewer Passengers," with "three or more doors," which are not taxis, authorized buses, or commuter vans. (42) Luxury cars and limousines are examples. (43) Similar to taxi drivers, FHV drivers undergo a detailed background check, (44) must obtain commercial licenses, submit their vehicle to a number of inspections, and have specific insurance coverage. (45) Unlike taxis, there are no caps on the number of FHVs permitted to operate in cities. (46) FHVs in most cities may not hail drivers or be equipped with taximeters. (47) Generally, however, there are fewer and less restrictive regulations for FHVs. (48)

      2. Contract Carrier

         Contract Carriers, like Common Carriers, offer transportation service for compensation, but the service (e.g., a delivery truck) is "specialized" and limited to a "particular instance." (49) Because Contract Carrier services are private, they are required to show that their service would not harm Common Carrier companies offering public service. (50) Additionally, unlike Common Carriers, Contract Carriers are able to refuse service. (51)

      3. Transportation Broker

         A transportation broker is a licensed (52) provider who does not "provide or offer to provide transportation service" or represent itself as a carrier. (53) Rather, a transportation broker arranges transportation for profit. (54) A broker acts as a middle-man, not an agent for the transportation-service provider. (55)

      4. Telecommunication Carriers and Information Service Providers

         App-based technology may also fall under telecommunication carrier regulations or exemptions. The Telecommunications Act of 1996 defines a telecommunication carrier as "an entity engaged in providing commercial mobile service ... [or] providing wire or electronic communication ... transmission." (56) Mobile telephone companies are an example. Telecommunication carriers are distinct from information services (57) because the latter do not fall under Title II carrier regulation. (58)

         Information services are businesses "generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information" for purposes other than managing, controlling, or operating a telecommunications service. (59) At the time of this writing, cable internet is an example. (60) Congress acknowledges that the internet has "flourished, to the benefit of all Americans, with a minimum of government...