Overregulation ‘Protects’ Consumers from Ride-sharing Carpools

Published October 31, 2014

In a classic case of regulatory overreach, the California Public Utilities Commission has notified three ride-sharing companies — Lyft, Sidecar and Uber — that their respective experimental new features violate state laws regarding chartered transportation.

In a letter, regulators announced that ride-sharing companies must first ask permission to experiment with new services such as carpooling. The assumption is that economic activity should happen only when government bureaucracy permits it to happen, not because consumers find value in a service someone freely chooses to offer.

The services in question aim to help customers save money on getting around. Uber’s carpooling program is called UberPool, and Lyft has dubbed its program Lyft Line.

In theory, the programs increase the ride-sharing companies’ efficiency by picking up passengers located along routes the driver is already taking, headed to points near the driver’s original destination. Seats that would otherwise go vacant as a driver takes a single passenger to his or her destination can now be filled. With these programs, one Uber driver — and one car, for those concerned about the environment — can transport more than one passenger by combining rides.

In each case, the three ride-sharing companies passed the efficiency savings on to consumers, by allowing the travelers to share and split the already discounted “multifare.”

However, this business idea made too much sense, and government regulators saw fit to intervene and kill it in the name of consumer protection. Regulators claim that UberPool and its cousins violate the state’s prohibition on sharing cab fares, because Uber and other similar services are classified as being on an individual-fare basis.

In its mission statement, the CPUC says it is committed to ensuring “reasonable rates” and “a healthy California economy” and aims to “stimulate innovation and promote competitive markets.”

Clearly the commission’s actions against the newborn ride-sharing market contradict its stated mission. The question the CPUC and other regulatory bodies across the nations should always be asking is, “What are the consequences of doing nothing?” How, specifically, does barring Uber, Lyft and Sidecar from pursuing this experiment protect the consumer? The only thing from which the CPUC is protecting consumers is lower fares and more convenient services.

[First published at the San Francisco Chronicle.]