Rideshare Battle Shifts to L.A.: City Tells Uber, Lyft, SideCar to Stop Picking Up Riders

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Sharing may seem harmless—a helpful, good thing for society, even. But for months, “sharing economy” businesses like Airbnb, FlightCar, and Lyft have come under legal fire in cities such as San Francisco, New York, and Austin. This week, ridesharing companies, which match nonprofessional drivers up with paying passengers, received cease-and-desist orders from Los Angeles authorities.

Cease-and-desist orders went out to Uber, Lyft, and SideCar on Monday. A letter addressed to SideCar CEO Sunil Paul from Thomas M. Drischler, the Los Angeles Department of Transportation’s taxicab administrator, states, “Due to the fact that your company has no permits or license to transport passengers for hire, in the interest of public safety, Sidecar, including all of its agents and contractors, is hereby directed to cease and desist from picking up passengers within the City of Los Angeles,” according to Southern California Public Radio.

The CEOs of Uber and Lyft received similar letters. If drivers operating in coordination with these upstart ridesharing services don’t comply, they could be arrested and have their cars impounded for up to 30 days, the letters warn.

The Los Angeles Times editorial board bashed the transportation department’s move, stating that the city’s taxi regulator “doesn’t have the authority” to tell the upstart sharing economy companies to stop picking up passengers. “Uber, Sidecar and Lyft may be disrupting the cab business, but they’re not operating cab companies,” the editorial reads.

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SideCar’s Paul has made essentially the same argument in the past. “SideCar is not a taxi company,” Paul wrote earlier this year, when SideCar drivers were threatened with having their cars impounded in Philadelphia and Austin. “SideCar is a smartphone app that instantly matches people for peer-to-peer ridesharing. SideCar drivers are regular, everyday people willing to give rides to people who need them. People pay what they want and drivers choose when they drive, how often they drive and where they go.”

Officials cracking down on ridesharing operations claim that they’re doing so due to safety concerns. “These companies have no permits, and that’s a real concern to us,” Drischler said, according to the LA Times. “That raises safety issues.”

Others see the crackdowns on ridesharing mainly as a means to defend the turf of traditional taxi companies, which provide cities with a steady flow of tax dollars and fees for licenses and permits. On Tuesday, 200 taxi drivers circled Los Angeles City Hall and honked horns to protest ridesharing operators and implore officials to regulate or shut them down, the Associated Press reported. “We feel like they come and steal our fares through these apps,” one cab driver told a local TV station.

Sharing economy operations aren’t necessarily opposed to all regulation. But because their business models are so new and different they think it’s unfair to lump them in with traditional companies and treat, for example, someone who occasionally rents out an extra room via Airbnb the same as a hotel.

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Arun Sundararajan, a professor at New York University’s Stern School of Business who studies the sharing economy, tends to side with the Airbnbs and Sidecars of the world. “These are new models, and they don’t fit into the old boxes,” Sundararajan told me recently. “You can’t force a business to admit it’s a taxi company when it’s not.”

Sidecar, Lyft, and Uber have all stated that they’ll keep operating in Los Angeles. Perhaps it was just coincidence, but Sidecar seemed to thumb its nose at Los Angeles by putting the spotlight on one of its L.A. drivers on the company’s blog on Tuesday — the day after the city issued the cease-and-desist letters.