Over-reaching government, emotional voters, and one mighty frustrated cityful of people.  Welcome to Austin, Texas.

Austin has cut off its nose to spite its face. A few voters, in attempting to make a political statement to “ride sharing” companies like Uber and Lyft, have violated John Stuart Mill’s first rule of living in society: “not injuring the interests of one another.”  They have damaged the quality of life for tens of thousands of Austin residents, without good cause.  In fact, with bad cause - the ordinance they approved is extortionary.  Apparently they didn't even know.

On May 7, voters in Austin, Texas, approved burdensome and unnecessary regulations for all ride sharing companies. As promised, Uber and Lyft terminated service there. Now thousands of drivers are out of work and tens of thousands of riders are out of transportation. People are angry. The vote, which was intended to close the issue, only made it more intractable.

Only 17% of registered voters in Travis county (where Austin is located) voted on the proposition. Of those, 56% voted to keep the City’s recently-passed regulations in place. That means roughly 9.5% of registered voters actually made this decision – a small minority of voters dictating affairs for the whole population. Even setting that aside, it wasn’t a decision any voter had the right to make on behalf of a fellow citizen. In a free society, when there are two parties that wish to engage in a lawful transaction, there is a tremendous burden of proof on any would-be regulator.  It must prove that each regulation is necessary to protect society from the transaction.  That didn't happen in Travis county.

Many voters believed the Proposition was a choice between modest regulation – a requirement for fingerprint-based background checks – and none at all. In fact, it was a choice between the City’s existing ordinance and the industry’s proposal (a reduced version of the same ordinance).  The City’s ordinance, which voters selected, introduced many new regulations, including:

  • Ride-sharing companies must apply annually for permission to operate in the city. §13-2-511
  • Companies “shall pay an annual fee” based on either taxi permit fees, 1% of local revenues earned, or total miles driven. §13-2-532 (A)
  • Companies “shall pay an additional fee of one (1) percent” of local revenues earned if it does not participate in the “Safety Assurance Program” set up by the city. §13-2-532 (B)
  • Companies must deliver various special data sets, “recorded in four-hour blocks,” to the city government, for things like “number of trips requested, but not serviced, according to zip code”. Operating permission will be revoked if this special data is not delivered promptly each month. §13-2-516
  • Companies “shall establish a driver-training program.” §13-2-529
  • Companies must make special accommodations for handicap passengers and service animals. §13-2-517 (B), (C), (D)
  • Companies “shall conduct outreach events to community organizations … [and] to communities that are of lower social economic strata.” §13-2-517 (E) and (F)
  • Vehicles must display a city-approved emblem at all times when providing services. §13-2-522
  • Drivers must pass a “finger-print based background check.” §13-2-527
  • Drivers are prohibited from accepting “street hails” or any other rides not “booked through the digital platform.” §13-2-531

Has the burden of proof been satisfied for each of these requirements?  Has it been clearly established that each is necessary to safeguard the interests of people in Austin, regardless of the likely harm?  Obviously not.  Some of the requirements are not only unnecessary for safety, but frankly unreasonable.  Why should Uber and Lyft have to invest in custom data-analysis software or conduct community outreach events?  Imagine if cities around the country imposed the same obligations, and you see how outrageous this regulation really is.

If every city required data and community outreach like Austin does, ride sharing companies would also need to be business intelligence companies and community activist organizations.  Of course, charitably in the latter two senses.  Austin won't pay for these services - it demands them for free. In fact, it charges for the privilege of rendering them, because of the special taxes it levies on these companies.  So these companies would be forced to carry all their charitable lines of business on the revenue of one, which would already be less profitable due to the additional taxes.  These companies couldn't handle that in every city in the United States.  Austin is demanding special treatment.  It's a case study in regulatory extortion: "Our government will only let you do business here if you scratch our back."  And Austin voters supported it.

Why did people believe all this new regulation was prudent? It's not clear that anybody knows. It doesn’t appear to be about crime. As of at least November, 2015, "the only local ride-share incident in Travis County that has resulted in criminal charges involves former Uber driver Michael Olu-Wehuje, 55. The victim told police the driver held her against her will after she agreed to go to his apartment with him. She was unhurt." (KXAN).  Ultimately, there seems to be widespread agreement that riding in an Uber or Lyft car was no more dangerous than riding in a taxi.

If heavy regulation wasn’t necessary to deter crime, why did these Austin voters want it? There is reason to believe it was intended as a slap in the face to ride sharing companies.  These companies clearly have a public image problem in Austin; a town notorious for being politically emotional. Many Austin voters declared support for the new regulations because they refused to be “bullied” by “arrogant” companies like Uber that didn’t want to be regulated. (Although they didn't say why a company should be considered arrogant for resisting unnecessary regulation.) Others talked about “corporate ethics” and “conscious consumerism.”  (Although they didn't explain why they should be entitled to force their personal ethics down other people’s throats.) The simple reality is that many Austin voters didn’t feel warm and fuzzy about Uber and Lyft. So these voters abused the power of democracy to send those companies a message: “Be nicer, somehow.” This ambiguous, ridiculous message came at the cost of some of the freedom and quality of life of their fellow citizens.

Ironically, on May 11, "the Austin Transportation Department sent a memo to the mayor and city council suggesting the city deregulate the taxi industry.” (KXAN) The reason ride-sharing companies have been so successful is that the taxi industry is so heavily regulated. The reason ride sharing companies abandoned Austin is that the city chose to make the ride sharing industry as heavily regulated as the taxi industry. The mistake is already apparent. Austin’s goal should not be the same level of increased regulation, but rather the same level of decreased regulation. More to the point, as close to zero regulation as possible. Less government interference, lower taxes, cheaper fares, happier riders, wealthier drivers. Greater happiness all around.  All because government didn't impose itself where it wasn't needed.

A small number of Austin voters made a big mistake on behalf of Travis county. They allowed their emotions to trump good principles, not to mention due diligence. They unnecessarily infringed on the freedom of their fellow citizens, they did so in a way that materially harms many people’s quality of life. Let’s hope other American cities learn from their mistake.

UPDATE
Who cares about rule of law?  Bloomberg has reported that Austin's mayor invited Uber and Lyft to ignore the city's new ordinance:

[Austin mayor Steve Adler] has quietly assured the big ridesharing companies that they would have nothing to fear if they continued to operate without changing their practices. "There's no fingerprint enforcement specified and set out in the ordinance," he said. "I have communicated that to Uber and Lyft."