Transportation Companies’ Competition, Conflicts Escalate in Chicago

Published October 6, 2014

As the popularity of alternative ridesharing companies like Uber and Lyft continues to increase, Chicago Mayor Rahm Emmanuel and Chicago city cab advocates are searching for ways to use the power of regulations to protect the city’s taxicab industry.

In October, Emanuel pitched several reform ideas to the city council in an attempt to ease some of the restrictions and financial fees levied against individual cab drivers.

Among those ideas was a plea to reduce lease rates for cab drivers by 10 to 20 percent — a reduction saving drivers $2,400 to $5,600 a year. It would also require a credit for cabs that bear advertising, ensuring drivers got to take home some of the revenue from selling ad space on their car.

Emanuel also pushed for the creation of a citywide mobile phone app, similar to the kind utilized by ridesharing companies to increase ease of use and accessibility for customers looking for a taxi.

In addition, the city’s proposal would cap credit card transaction fees at 3 percent, as opposed ot the current 5-percent cap, and reduce many of the maximum penalties for drivers.

Evolve or Die

Anthony Sanders, an attorney at the Institute for Justice, a legal firm which deals with taxi and ridesharing cases across the country, told the Illinois News Network that the competition between the two groups in Chicago is being replicated in many places throughout the country, causing the established cab companies to become more appealing to customers.

“Right now, people are loving the ease and convenience of Uber and other such companies,” he said. “Cab companies are trying to figure out a way to regain their market monopoly and ward off the challenge from the private companies.”

In addition to taxis beginning to mimic the ridesharing companies’ technology, they are also working to put political pressure on local and state governments to squelch competition.

“It’s based off of fear, really,” Saunders said. “This new product is threatening to cut into business, and they’re attempting to keep that from happening.”

The United Taxidrivers Community Council (UTCC) — a  group working to unionize cab drivers in the city and negotiates on their behalf – proposed a plan this summer to increase driver pay by raising cab fares.

A five-mile ride, with five minutes of waiting time, would cost a Chicago cab customer $13.80 — a rate that places Chicago thirty-second amongst other major U.S. cities, ranked in terms of highest cab costs. The union’s proposed rate changes would push the Windy City into the national top 10.

More Money, Less Work

As part of their 10-point plan, the group also wanted to increase the time drivers are allowed to wait, and increase customer surchages by 25 percent. In its argument before the city council, UTCC cited a University of Illinois study suggesting that the cost of government fees and regulations decreases drivers’ take-home pay, prompting them to work longer hours.

“Over one hundred years ago, workers fought and died for the right to an 8-hour workday,” UTCC chairman Fayez Khozindar said in a statement. “How much longer, until we no longer have to drive 13-hours a day at below minimum wage?”

The city countered with its own study, which found the average cabdriver earns $12.14 an hour, or $33,857 annually, after fees and expenses.

In addition to the clash between taxicab unions and government, pressure continues from other outside advocacy groups.

“If a factory owner in Chicago paid his workers $4.38 an hour and kept them at work for 13 hours a day, it would be called a sweatshop. The taxi industry in Chicago is a sweatshop on wheels,” Michael McConnell, regional director of the human rights group American Friends Service Committee, said in a press conference on the issue.

Sanders concluded that these clashes would continue with increased intensity as a direct result of a public entity being outplayed by private companies.

“Competition brings out the best in people and in companies,” he concluded. “Right now, cab companies are learning that the hard way.”

Brady Cremeens ([email protected]) is a reporter for Illinois News Network. Used with permission of the Illinois Policy Institute,