New York Judge Tosses Lawsuit Demanding Uber Ban

Published October 29, 2015

A New York City judge rejected a taxicab company coalition’s lawsuit against city taxi regulators, dismissing the industry coalition’s argument city law authorizes only taxicabs to accept passengers off the street.

The lawsuit was joined by a bank, Melrose Credit Union, as plaintiffs also argued city regulators’ deregulatory actions had caused the price of taxicab medallions to plummet. The credit union alleged it had invested hundreds of millions of dollars in taxicab licenses as an investment tool and lost money because of declines in medallion prices caused by increased competition.

‘Protection from Innovation’

Liya Palgashvili, an assistant professor of economics at Purchase College-State University of New York, says cartels, similar to the taxicab industry prior to the rise of Uber, benefit insiders and investors, whereas competition helps everyone.

“What would be devastating for the economy is if we felt the need to always protect certain companies from new innovations,” Palgashvili said. “For economies to thrive and for people’s standards of living to increase, we have to allow for new innovations to enter markets. This means we can’t fixate upon one company and one industry and allow that company or industry to demand legal protection from innovation.”

Caveat Commodator (‘Investor, Beware’)

Palgashvili says taxicab company investors have only themselves to blame for any losses.

“Credit unions such as Melrose should have been more perceptive and hedged by investing in companies such as Uber and Lyft,” Palgashvili said. “Investment companies often lose money when they don’t properly assess risk, but it’s not the government’s job to give them a bailout.

“I feel for [them for] what’s going on here, but at the same time, consumers should not be made worse off because credit unions made a bad investment strategy,” Palgashvili said. “Instead, we should allow consumers to enjoy better-quality products and services by giving companies the opportunity to serve them.”

Forward the Future

Jared Meyer, a researcher for the Manhattan Institute for Policy Research, says everyone is better off when businesses compete for consumers’ dollars.

“Basing economic policy on protecting politically favored interests is the antithesis of fairness,” Meyer said. “We need to welcome new, disruptive services that put technological innovations to use. This is the way to move forward into a 21st century economy.”

Meyer says less regulation of taxicab companies would help promote growth and innovation.

“Instead of pushing back against new competitors by lobbying state and local government to ban them, taxis should argue that existing regulations need to be lessened so that they can adopt some of ridesharing’s best innovations,” Meyer said. “In other words, taxis need to become more like Uber. We don’t need Uber to become more like taxis.”

Gabrielle Cintorino ([email protected]) writes from Nashville, Tennessee.

Internet Info:

Queens County Supreme Court, Melrose Credit Union Montauk Credit Union v. City of New York: