The taxi industry in D.C. has successfully swayed much of the City Council to pass a regulation hurting consumers and protecting the incumbent taxi industry. Specifically, the Council would impose a minimum fare on “sedan”-class taxis, to keep these sedans from competing with the traditional taxi industry.
The impetus for this crack-down on non-traditional cabs is the rise of Uber, an innovative service harnessing the power of mobile devices to give people a new door-to-door option in cities. Specifically, Uber is rolling out a cheaper alternative to its current model of more costly luxury sedans. This would cut into cabbies profits. So rather than innovate, cabbies lobby. And government complies.
On its blog, Uber writes:
It was hard for us to believe that an elected body would choose to keep prices of a transportation service artificially high – but the goal is essentially to protect a taxi industry that has significant experience in influencing local politicians. They want to make sure there is no viable alternative to a taxi in Washington DC, and so on Tuesday (tomorrow!), the DC City Council is going to formalize that principle into law.
In Portland, the cab industry is pushing minimum-fare rules, too.
Many on the political Left in DC have joined in the fight against the anti-Uber law, just as they joined in the fight against anti-food-truck laws. I hope these incidents remind people that the nature, purpose, and effect of regulation is very frequently about protecting incumbent businesses from competition — to the detriment of the entrepreneur and the consumer.
For years, big airlines avoided competition thanks to airline regulation that set minimum prices. Large employers benefit from minimum-price legislation in labor — i.e., minimum wage. Wal-Mart recently supported a higher minimum wage and an employer mandate in health-care.
Put more generally, when you give power to government, you give power to the special interests.
Some more examples of big guys supporting regulations that crush smaller competitors:
- Mattel, the world’s largest toymaker, supported strict new federal toy-safety regulations
- Philip Morris, the world’s largest tobacco company, supported strict new federal tobacco regulation.
- GE supported strict efficiency standards on light-bulbs.
- Nike supported climate-change rules that crush its smaller competitors who actually make things in the U.S.
- H&R Block supported new IRS regulations on tax preparers.
- Big food producers supported new food-safety regulations.
- Restaurants regularly support regulations on food trucks.
- The financial planning industry group called for more federal regulation of financial planning.
- Hedge-fund giant Jim Chanos advocated federal registration of hedge funds.
- The American Bankers Association applauded new federal credit-card regulations.
- The big trucking companies supported new trucking regulations