Federal Judges Dismiss Chicago Taxicab Owners’ Lawsuit

Published November 8, 2016

Federal judges rejected an appeal filed by Chicago taxicab companies claiming the city government was violating the companies’ constitutional rights by not applying taxicab regulations to peer-to-peer economy transportation network companies (TNCs) such as Uber and Lyft.

The Illinois Transportation Trade Association (ITTA), a lobbying organization representing the interests of taxicab company owners, sued the city in 2014, asking the court to force the Chicago government to require TNC drivers to purchase taxicab medallions or government-issued licenses.

In April 2016, Judge Sharon Johnson Coleman of the U.S. District Court for the Eastern Division of the Northern District of Illinois ruled against ITTA. The lobbyist group appealed the case to the U.S. Court of Appeals for the Seventh Circuit. A three-judge panel upheld Coleman’s decision in October.

Paying for Protectionism

Jacob Huebert, a senior attorney with the Illinois Policy Institute’s Liberty Justice Center, says taxicab companies pay the government for the ability to keep consumers hostage.

“Medallions have historically been very expensive,” Huebert said. “Even though that’s an expense for the taxi companies, they like this system because it limits the number of people who can come in and compete with them. It creates a high barrier to entry, because not just anybody with a suitable car can have a taxi; only somebody with a car who can afford that medallion. It’s been a monopoly, and prices have been high and the quality of service has been relatively low.”

Huebert says TNCs, also known as “ridesharing companies,” do consumers a favor by bypassing some government restrictions.

“With the ridesharing companies, like Uber and Lyft, you don’t need to have a medallion issued by the city,” Huebert said. “You just need to have a car that meets certain requirements, jump through certain hoops the city put in place, and you can be driving a rideshare vehicle.”

Big Effect on Consumers

Pamela Villarreal, a senior fellow with the National Center for Policy Analysis, says the court’s decision is a win for consumers.

“Siding with Uber essentially begins paving the way for taxi services to innovate,” Villarreal said. “This is good for consumers because the taxicab industry mostly has a major monopoly. I really think this is going to change the way, with a major overhaul with ridesharing as we see it, whether it is taxis or Uber.”

Villarreal says she’s unconcerned about the effect the court decision might have on taxicab companies.

“It may or may not kill the cab industry, but if it does, my response is, ‘So what?'” Villarreal said. “If it helps consumers to have a better ride experience, then so be it.”