Taxicab Companies Sue Over New Massachusetts Uber Laws

Published October 14, 2016

Taxicab companies in Boston, Massachusetts are suing Gov. Charlie Baker (R) and Massachusetts lawmakers over recently approved restrictions on transportation network companies (TNCs) such as Uber and Lyft.

The law, implementation of which begins in November, imposes a 20-cent tax on each TNC ride purchased by consumers to fund new subsidies for taxicab companies in the state. The suit claims the law unfairly favors TNCs over taxicab companies.

No court date has been set for the lawsuit, which will be heard by Judge Nathaniel Gorton in the U.S. District Court for the District of Massachusetts, but summons for plaintiffs were mailed by the court in October.

Sean Mulholland, an associate professor of economics at Stonehill College, says taxicab companies are correct to think they’re under more regulation than Uber drivers.

“The way the regulations are written, it’s both the case that it’s more difficult to be a taxi driver and in some cases impossible to expand the number of taxis or the availability of taxis, given the regulations involved,” Mulholland said. “I think it’s reasonable to say that the hurdles are higher for taxicab drivers and the hurdles are greater for the expansion of taxicab services.”

‘Making It More Costly’

Mulholland says the bill signed by Baker in August, House Bill 4570, hurts consumers and taxicab companies.

“If you’re trying to help the people, Massachusetts overstepped its bounds here,” Mulholland said. “It’s making it more costly for people to use Uber for point-to-point methods, and they’re subsidizing the taxis, which have a higher cost because of the regulatory structure. You’re basically trying to get Uber to subsidize taxis, which are saying, ‘We can’t compete.’

“When the taxicab drivers and owners say, ‘This has hurt our industry,’ they’re defining their industry as ‘taxicabs,'” Mulholland said. “What they’re not defining as ‘industry’ is point-to-point transportation options. Has Uber expanded the point-to-point transportation option? The answer is, astoundingly easily, ‘yes.’ It’s pretty obvious, on net, Uber has basically provided additional, low-cost transportation that just wasn’t available.”

Regulatory Reform for All

Matt Blackbourn, a research associate with the Pioneer Institute, says the Massachusetts lawsuit could have national implications for consumers.

“This question will be at the center of the legal discussion in around 50 lawsuits within the United States alone right now,” Blackbourn said. “In answering this, it is important to acknowledge that at least one court has ruled in a manner that defies TNC objections that they are a ‘technology company’ and not a taxi company.”

Blackbourn says it’s important for courts, lawmakers, and regulators to change the regulatory environment to accommodate the shift to new technologies and forms of commerce.

“Firms like Uber, Lyft, Airbnb, and TaskRabbit are facilitating a paradigm shift towards a type of commerce that has proven very popular among consumers,” Blackbourn said. “While there are a lot outstanding issues to address in the rise of this kind of commerce—for example, employee versus contractor designations at Uber, public safety concerns with TNCs and short-term rentals—it’s still transforming the business landscape as we know it. To make policy or rules in the court system in a way that ignores this economic reality would be regressive and short-sighted.”