California first state to regulate ridesharing

By Robbie Webber

The popularity and use of ridesharing services and web sites, such as Lyft, Uber, and Sidecar, has risen as the near-ubiquity of smartphones and fast cell service has allowed passengers needing rides to quickly connect with drivers using their private cars to make a little extra money. Now California has become the first state to regulate these services and has preempted the ability of local jurisdictions to impose their own rules.

Ridesharing has been controversial for years as the taxi and limousine industry in large cities warily eyed the services and determined that they posed a threat to their business. Ridesharing apps offer the convenience of calling for a ride when you need one, but often at prices considerably lower than a taxi or regulated limousine. The California Public Utility Commission had previously sent cease-and-desist letters to the services but later allowed them to continue operation as they prepared the regulations. Local authorities also had battled the companies, including arresting drivers in Los Angeles and banning the cars from taxi lines at the San Francisco airport.

The CPUC has set insurance and safety regulations that would allow the services to continue under a new category known as a Transportation Network Company. The services and drivers will have to comply with a set of 28 rules. Vehicles will have to be inspected, drivers will need to undergo a criminal background check and take a safety course, and liability insurance will be required.

Although the matter seems to be settled in California, regulation is still being debated in other markets. Seattle is considering its own rules, and Dallas officials are trying to determine what jurisdiction they have over the companies after allegations that they used political muscle to protect the powerful and established Yellow Cab companies. In Miami, the owners of taxi medallions are at odds with the drivers over regulation of ridesharing.

While state and local authorities struggle to set rules, both drivers and riders seem to be embracing the technology and the services are spreading to new markets each month.

Robbie Webber is a Senior Associate at SSTI.