Issue
The current state of the ridesharing industry, represented by such companies as Lyft and Uber, does not have any legal regulations that would protect both drivers and consumers and their rights. Thus, government intervention is needed to prevent companies from exploiting the industry and putting both sides of the service at risk.
Background
The existence of digital ridesharing services such as Uber and Lyft can be considered a part of the innovative sharing economy. According to Crespo, these ridesharing platforms quickly gained popularity among the public due to many factors (79). The inexpensive model of the business’ sharing economy attracts many users. Social implications of the service allow customers to relate to their drivers and perceive them as real people.
Moreover, drivers find that ridesharing services are easier to navigate as they offer flexible scheduling and small company fee for using the platform (Deloitte Access Economics 33). In contrast to the taxi industry, the dynamic pricing of these innovative platforms and their unregulated entry point do not restrict drivers in any way (Flores and Rayle 3760). These reasons contribute to the rapid growth of the ridesharing industry and make it more widespread.
However, the use of these services poses a problem of control and security, as this complicated ridesharing industry is hard to regulate. It is possible for companies to abuse the fact that the business is not adequately controlled in financial and legal spheres (Posen 407). The influence of the taxi industry also plays a role in this process. Furthermore, the possibility of both sides of the service behaving negatively towards one another could be prevented by regulation.
Current Status
The services of the ridesharing industry are highly beneficial to its customers and workers (Hahn and Metcalfe 7). While consumers are satisfied with low prices and some communicative benefits of the service, drivers report to having flexible working hours, more opportunities, and less rigid pricing (Hahn and Metcalfe 8). The taxi industry cannot compete in these settings, which causes more negative effects for drivers that do not want to sell their license. However, at this moment, the ridesharing industry has some areas where drivers and customers may be exposed to unfair treatment. The legal considerations of pricing, for instance, remain unresolved.
Strategic Considerations
The advantages of the industry should be protected from businesses and their competition. There is no cap on the price for the use of ridesharing services, which may be exploited by companies unitizing surge pricing. Moreover, drivers of these services do not have any regulatory examinations and documents that would create an entry-level for new candidates. The analysis of other cities and their interaction with the ridesharing industry reveals that there is a need for regulation as it can protect the citizens and improve the state of the taxi industry as well.
The case of San Francisco shows that the taxi business was severely damaged by the unregulated ridesharing industry, which lacked any requirements for insurance and licensing (Flores and Rayle 3761). Thus, the concern for safety prompted the government to implement regulations to control some of the processes of the ridesharing services.
The analysis of another city, New York, further supports the necessity of regulatory intervention. Lam and Liu state that ridesharing services have features that cannot be implemented in the taxi industry, which significantly impacts its growing popularity (31). Although the authors argue that the business of NYC taxis is well-developed, such competitors as Uber and Lyft can present more benefits to customers. However, this research reveals that the system needs regulation to prevent high prices and low pay.
Options
Multiple areas of the industry can be recommended for regulation:
- One can establish a cap price on the services. Currently, companies have full control over the services’ costs, which makes their clients vulnerable to surge pricing. By regulating the maximum price, the government can ensure that customers of these platforms do not pay more than they have to.
- Ridesharing companies may be asked to disclose their trip data, which would allow the government to see the main parts of the cities which need more attention and funding. Thus, the roads and the infrastructure of these regions may benefit from such information. It is not necessary to ask drivers to share any private information about themselves or their clients as it would not align with the companies’ privacy policy.
- One can consider licensing drivers that want to work for a ridesharing service. A process of getting a non-expensive license may create a level of entrance for new workers and ensure the safety of customers as well. These documents do not have to be expensive, and they can be renewed every few years for a quarter of the initial price to maintain the high quality of the service.
Recommendation
The proposed options can be taken into consideration as separate changes. It is also possible to implement them simultaneously, creating a structured system of regulation for the ridesharing industry. The most important change for customers’ protection is licensing, while the economic safety of the clients can be maintained by establishing a cap price.
Next Steps
- Investigate the market to find the most appropriate cap price.
- Create a system of licensing for drivers.
- Negotiate the possibility of non-invasive information sharing.
Works Cited
Crespo, Yanelys. Uber v. Regulation: ‘Ride-Sharing’ Creates a Legal Gray Area. 2016. Web.
Deloitte Access Economics. Economic Effects of Ridesharing in Australia. 2016. Web.
Flores, Onesimo, and Lisa Rayle. “How Cities Use Regulation for Innovation: The Case of Uber, Lyft and Sidecar in San Francisco.” Transportation Research Procedia, vol. 25, 2017, pp. 3756-3768.
Hahn, Robert, and Robert Metcalfe. The Ridesharing Revolution: Economic Survey and Synthesis. 2017. Web.
Lam, Chungsang Tom, and Meng Liu. Demand and Consumer Surplus in the On-Demand Economy: The Case of Ride Sharing. 2017. Web.
Posen, Hannah A. “Ridesharing in the Sharing Economy: Should Regulators Impose Über Regulations on Uber.” Iowa Law Review, vol. 101, 2015, pp. 405-433.