Portland Taxicab Lawsuit Could Well Affect New Orleans…Eventually

A question arising from a new lawsuit in an Oregon federal court might well ultimately affect policy here in Louisiana. Specifically, can the government bar entrepreneurs from offering competitive prices, online discounts and prompt service merely to protect politically powerful insiders from competition?

The Institute for Justice (IJ), which is the free-market public-interest law firm gaining local attention for its successful representation of the monks at St. Joseph’s Abbey in St. Tammany Parish in their 2011 lawsuit against the Louisiana Board of Embalmers and Funeral Directors for trying to bar them from making and selling caskets, is now representing limousine and sedan services against local laws in Portland which restrict competition.

IJ’s release on the lawsuit is coupled with a video…

In 2009, the Portland City Council passed two measures designed to protect the city’s taxicab companies from competition at the expense of both consumers and limousine and sedan services.

Not surprisingly, Portland’s taxicab companies requested these regulations. What is surprising is that Portland agreed to impose higher transportation costs on Portlanders and put strict limits on limo and sedan entrepreneurs, just to make it easier for the city’s taxicab companies to make more money.

Recently, the city’s Revenue Bureau clamped down on Groupon.com promotions offered by two Portland limo and sedan companies, Towncar.com and Fiesta Limousine. When the companies offered discounted fares to their customers city enforcers immediately threatened the companies with a combined $895,000 in fines and suspension of their operating permits. In response to the controversy, the city has publicly stated that its job is to protect taxicab companies from competition by enforcing anti-consumer rules.

Portland cannot constitutionally seek to protect taxicab businesses from competition at everyone else’s expense.

The Portland lawsuit isn’t the first one IJ is pursuing, as they’re also going after similar abusive policies in Nashville

In New Orleans, a similar law is in place. In fact, it’s even worse. Ordinance § 162-841(a)-(b) in the city’s code requires a $120 minimum fare for limousines and $105 for sedans, rates which are even worse than those in Portland or Nashville. In fact, of the 10 local ordinances aimed at restricting competition from livery services to the taxi business IJ found, the Crescent City was the worst of the bunch.

And the over-regulation isn’t getting better. Just last week, a sweeping overhaul of the taxi business in New Orleans, which has been considered a failure and a “dissatisfier” for Crescent City tourists, laid on what looks like a rather oppressive new regulatory regime. Ask yourself if – though some of it certainly does sound good from a consumer standpoint and one would think quality cab operators would want to provide it to satisfy market demands – this isn’t intended to drive some cab companies out of the market and discourage other prospective entrants into the business…

By early 2013, passengers can expect:

  • Cabs with common-sense vehicle age limits and a prohibition on salvaged and junked vehicles;
  • the ability to pay fares with credit or debit card;
  • taximeter receipts with detailed information;
  • cabs equipped with GPS technology
  • tougher inspections and vehicle safety standards;
  • improved safety requirements including one seatbelt per passenger;
  • tougher ethical standards for taxis and the Taxicab and For Hire Bureau;
  • and the creation of a dedicated fleet of handicap-accessible cabs.

Drivers and CPNC holders also got wins, including:

  • Driver safety cameras and silent alarms;
  • taxicab lines minimums have been reduced to 25 taxis, allowing smaller groups to increase competition and grow wealth;
  • accessible taxi CPNCs are limited to non-CPNC holding taxi drivers of at least 5 years;
  • driver permit term length will remain 2 years;
  • CPNC annual fees will remain the same;
  • no increase in the transfer and processing fees for CPNCs;
  • the ability for local government to conduct background checks to improve customer service;
  • and more flexibility for temporary CPNCs for special needs.

A CPNC is a Certificate of Public Necessity and Convenience, and you’ve got to have one if you want to operate a cab in the city. The number of CPNC’s issued in New Orleans is currently capped at about 1,550, and until recently they were allowed to be bought and sold on a secondary market for as much as $65,000 – meaning that the taxi business has begun to be controlled by some questionable characters of former-Soviet extraction with ties to places like Chicago and New York rather than the independent entrepreneurs one would hope would dominate the industry.

The equivalent of a CPNC in New York, by the way, goes for well over a million dollars. Not exactly a healthy industry there, which leads to a proliferation of “gypsy” cabs in that city and mass chaos. Something similar exists in the Big Easy on a smaller scale.

But naturally, New Orleans’ mayor Mitch Landrieu thinks the increase in regulation – without any particular attention to the fact that the city has been attempting to regulate its way into a healthy taxi industry since 1956 – will solve the problem.

“Our unique culture, music, cuisine, and architecture make us an enviable place to live, work, and visit, but for more than a generation, our taxicabs have been substandard,” said Mayor Landrieu. “This is not an assault on the thousands of taxicab and for-hire drivers who serve as important frontline ambassadors for our city and region, but the quality of cabs need dramatic improvement. After working with taxicab industry stakeholders, hospitality industry leaders and residents, we are now proud to have sweeping but common-sense reforms in place that will modernize the taxicab experience and improve taxicab passenger and driver safety in New Orleans. Safe, reliable and predictable ground transportation are critical services we must provide our residents and visitors.  I want to thank the City Council for their partnership on this issue.”

Of course, given the history of regulatory failure of the taxicab industry, the best way to improve taxi service in New Orleans would seem to be to let limousine and livery operators eat into the business, thus allowing the market to wipe out the worst of the current taxi operators and forcing the rest to either cut prices or improve service and comfort. Instead, the city merely doubled down on the same failed prescriptions which have produced a lousy industry that negatively affects tourism.

One would hope that IJ’s lawsuits in Portland and Nashville could send a shock through the industry nationally and somehow move the needle in New Orleans. IJ has had success in this business thus far – legal actions it has taken in Minneapolis and Denver, for example, have led to an opening of the transportation-for-hire markets in those cities, and IJ approaches to mayors in Indianapolis and Cincinnati have led to their voluntarily opening the markets. John Kramer, who is IJ’s Vice President of Communications, noted this morning that since deregulation in those two cities there are now more independent owners of cabs there, more women owners, more minority owners and a healthier industry.

Kramer’s observations aren’t just his own. From the Hoover Institute at Stanford University

Taxicab regulation in Indianapolis had long followed the familiar anti-competitive story line. Taxis were scarce because the city had issued only 392 licenses, many of which had been “warehoused” by owners to stifle competition. Fewer than 250 actual cabs were prowling the streets, and five cab companies held 80 percent of the licenses. Service was poor and fares were high. The commission proposed sweeping deregulation that lifted the cap on the number of licenses, allowed price competition, and cut arbitrary rules (such a ban on “cruising” for fares) that reduced the market for service.

To counter the resistance of entrenched interests, the commission mobilized individuals who favored reform to testify before the city council and educate the news media. The most powerful advocates were minorities who wished to break into the taxi business and disabled people who were harmed by poor service; these groups also helped win the vital support of the Urban League. Especially potent was the testimony of James Chatman, a cab driver for 25 years who had repeatedly been denied a license to operate his own taxi. Prior to the city council vote, Chatman made the rounds of local TV stations to plug deregulation. The city council finally passed the reforms by a vote of 21 to 7. Henceforth the taxi business in Indianapolis will be open to anyone who can secure a driver’s license and insurance, meet vehicle safety standards, and pay a $102 fee.

The results were immediate and dramatic. Within 30 days, the number of companies operating taxicabs increased 50 percent. There are now about 70 companies (40 of which are owned by women or minorities) operating 500 taxis. Fares fell by about 10 percent. The average waiting time was cut in half and complaints about service dropped. Taxi drivers are now paragons of civility; it is not unusual to be greeted by a taxi driver wearing a tie instead of shorts and a T-shirt.

They’ve had deregulated cabs in Indianapolis since 1994. As an aside, the author was there in 2006 for the Final Four and the cab service (three rides, all in independently-owned cabs with the proprietor driving the car) was the best I’ve ever had – a significant improvement over what’s typically on offer in New Orleans.

And in other cities, a web-app service called Uber has been serving as a lead generator for limo services and earning a sizable fan base among people willing to pay for the convenience and comfort a limo service can provide above and beyond what the overregulated and oligarchical taxi industry can – with predictable pushback from local regulators.

But since it’s pretty clear that the politicians in charge of New Orleans won’t be deregulating the taxi industry, it’s probably hopeless to expect they’ll lower the regulatory minimums on livery service rates either. And that means IJ has a potentially fertile territory in the Crescent City for finding a client to attack the restrictive and unconstitutional – and failed, let’s not forget that – regime in that town.

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