By Sudhin Thanawala, September 19, 2013
SAN FRANCISCO — Web-based ride-hailing companies will have to make
sure drivers undergo training and criminal background checks and have
commercial liability insurance under rules approved Thursday by
The state Public Utilities Commission voted unanimously in favor of
those rules and others for such companies as Lyft and Sidecar. Both
companies rely on smartphone applications to connect riders and drivers
who use their own vehicles.
Commissioners said the rules were needed to ensure public safety.
"Today, we have an opportunity to introduce groundbreaking regulation
in the transportation industry," commission President Michael Peevey
said before the vote.
The regulations put ride-hailing firms in a new category of business
called transportation network companies, or TNCs, that are separate from
taxi cabs and limousines.
In addition to training, criminal background and insurance
requirements, the companies will have to implement a zero-tolerance
policy on drugs and alcohol and ensure vehicles undergo a thorough
The founders of Sidecar and Lyft applauded the commission's decision.
Sidecar founder Sunil Paul said it helps make his company and others
like it "mainstream" by giving them a legal permit to operate.
Lyft co-founder John Zimmer echoed those sentiments, saying the new category helps legitimize car-sharing companies.
"It provides clarity in the marketplace and in the community and
authorizes the operations we've been doing for the last 14 months,"
The companies, additionally, said they already meet some of the new
rules, including the background checks and commercial insurance
The California utilities commission's vote came amid debate over how
government should regulate the rapidly growing "sharing economy."
New businesses using the Internet are trying to make it easy for
people to share their property, be it cars or houses, and earn some
money. But they face opposition from traditional service providers that
complain about being undercut.
The San Francisco Cab Drivers Association maintained that even after
the vote, TNCs are not subject to the same level of scrutiny or
oversight as taxi services, which are locally regulated. The group
claimed the PUC has far fewer safety investigators to enforce the new
rules than local regulators who oversee taxi companies.
The group had also argued that the ability of TNC drivers to choose
who can ride in their car could lead to discrimination against customers
based on the drivers' profiling of the rider's background. It is
illegal for cab drivers to refuse service to riders based on their
ethnicity, disability or income level.
"Without proper local regulatory oversight this can only lead to
abuse by TNC drivers, companies and the opportunistic element leading to
the decreased quality of passenger service for the disabled, elderly
and disenfranchised who rely on taxis for transportation," the group
said in a statement.
Commissioners heard from numerous taxi cab drivers and owners before the vote.
"This is not real ride-sharing," said Hansu Kim, president of San
Francisco-based DeSoto Cab Co. "This is a commercial business that
venture capital is backing, and the rules for commercial vehicles need
to apply. That is the bottom line."
Supporters of ride-sharing companies said they fill the gap left by a
dearth of taxis, which are often hard to find on the streets of San
Commissioner Michel Florio said he has found some people rely solely
on taxis, while others only use companies such as Sidecar and Lyft.
"People have different preferences and different needs. This decision
allows both to take place on what I think is a fair basis," he said.