State Regulators Ban Ridesharing Companies’ New Carpool Services

Published September 18, 2014

Smartphone apps are increasingly placing new powers in the hand of users— whether it’s finding hookups on Tinder, sharing anonymous sentiments on Yik Yak, or flagging down an Uber cab that’s heading your way, with a few taps on a smartphone.

Actually, one of those mobile apps was banned this month by California bureaucrats, claiming that Uber and other popular ridesharing companies failed to gain permission from regulators before launching their respective new products, and therefore must cease serving customers with products they desire.

Illegal Features

In September, the California Public Utilities Commission (CPUC) notified taxi ridesharing companies such as Uber, Sidecar and Lyft, that their carpooling features on their respective smartphone apps are violating the state’s regulations regarding charging a single fee for multiple people in a “charter-party vehicle,” according to a CNET article.

The feature deemed illegal by Ca. regulators was — exemplified by Uber’s program, “UberPool” — discounted fares by their agreement to share a ride with fellow travelers located elsewhere who are heading toward the same destination, therefore allowing travelers to split the cost amongst themselves. 

CPUC regulators notified the rideshare companies that such programs were illegal under Section 5401 of the state’s Public Utility Code, which states that “no charter-party carrier of passengers shall, directly orthrough an agent or otherwise, nor shall any broker, contract, agree, or arrange to charge, or demand or receive compensation, for the transportation offered or afforded that shall be computed, charged, or assessed on an individual-fare basis.”

According to CPUC, ridesharing companies are forbidden from testing out such new services, unless they receive express permission to do so from the commission or lawmakers.

Hyperbole From Entrenched Interests

In addition to government agencies’ restriction of innovation in the for-hire transportation market, established players in the market are also fearful of new players’ entrance into the market.

Earlier this month, New Orleans cab company owner Tony Makhoul told WDSU-TV 6 that ridesharing companies such as Uber are a “cyber-terrorist organization,” in reaction to the city council’s recent decision to allow the company’s entry into the market.

In July, Makhoul testified against free-market capitalism in the Big Easy, telling City Council that “it’s hypocritical, preposterous, and — indeed — disgusting that we are entertaining Uber in our market today.”

Cooperation Despite Congestion

Despite the setbacks in Ca., the companies are attempting to work around the regulatory blockade.

“We welcome the opportunity to discuss this new form of shared transit with President Peevey and the CPUC to ensure that residents continue to have access to this innovative and sustainable transportation option,” the Lyft spokesperson told CNET.

According to CNET, Sidecar is also currently reviewing its options, seeking a way to continue to roll out its new feature and comply with the CPUC’s regulations.

Hannah Yang ([email protected]) writes from Athens, Ohio.

Internet Info:

“State of California Public Utilities Commission Letter to Travis Kalanick,” State of California,