Kansas Ridesharing Regulatory Fight Freezes Uber Operations

Published June 24, 2015

Ridesharing company Uber is back in operation in Kansas after an intense legislative battle between the state legislature and Gov. Sam Brownback (R).

After Kansas lawmakers overrode Brownback’s veto of a bill requiring ridesharing drivers to undergo government background checks and purchase insurance policies providing at least $1 million in per-incident coverage, Uber suspended operations in the state.

The bill prompting Uber’s pullout also requires the company to collect confidential information about the status of drivers’ finances, adding more regulatory paperwork for transportation network companies and increasing compliance costs.

A few weeks later, Brownback signed a bill reducing the state’s regulations on ridesharing companies such as Uber, allowing the popular company to resume serving Kansas’ consumers.

Protecting Entrenched Interests

Johnson and Wales University Associate Economics Professor Adam Smith says government regulators and special interest groups often claim consumer protection is their intent when their true goal is to enrich their own interests.

Smith is also a policy advisor for the Heartland Institute, which publishes Budget & Tax News.

“The main reason is entrenched interests, such as the old cab companies—the ones that usually allocate cabs by some kind of medallion-like system—and government agencies,” said Smith. “[They want to limit the market so they] can get higher fares and raise more tax money for the city.

“Entrenched interests are already a part of government, so of course any time those interests get threatened by new competition, they can always look to government as an ally,” Smith said.

“Government regulations always seem to be put in terms of serving consumer interests, and we can always look at the nominal laws and regulations and agree they may make sense,” said Smith. “The problem is when all this is put into practice it is not aimed at those lofty goals but rather at securing the financial entrenchment rights of the older group.”

Stopping Competition          

Jeffrey Tucker, the chief liberty officer of Liberty.me and a policy advisor for The Heartland Institute, which publishes Budget & Tax News, says government regulations on peer-to-peer (P2P) economy companies such as Uber are pushed by a coalition of crony capitalists and government busybodies.

“Municipal taxi companies themselves are backing these regulations,” Tucker said. “They are the ones pushing for them to stop competition. That’s the purpose of the regulations; it’s not to protect consumers.”

No Interest in Customer Service

Tucker says pro-consumer innovations of Uber and other ridesharing services threaten the government-backed monopoly on for-hire transportation.

“Alternatives to city taxi monopolies are not just cheaper, the drivers are more helpful, more anxious to serve their customers, and have a very strong investment in wanting their customers to come back to use their services,” Tucker said. “Municipal taxis don’t really have that. Most city taxies don’t know who their passengers are and have no interest in them.”

Defining the Future

Instead of fighting the future, government regulators should work to encourage innovation, Tucker says.

“We are all carrying these miraculous communication devices in our pockets,” Tucker said. “We now have the technology to connect all kinds of consumers to all types of service providers directly.”

“This P2P revolution is changing our economic structure, including the way we work, live, travel, and buy,” Tucker said. “It is getting masses of people invested in market-based solutions. The ramifications of that, politically and socially, are immense and epic and will continue to define the economics and politics of the 21st century.”

Tony Corvo ([email protected]) writes from Beavercreek, Ohio.

Internet Info:

Adam Thierer, et al., “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem,'” Mercatus Center: https://www.heartland.org/policy-documents/how-internet-sharing-economy-and-reputational-feedback-mechanisms-solve-lemons-prob/