After being told to ensure their drivers were not safety risks, Uber and Lyft have picked up their ridesharing app and fled Austin, Texas. The companies had spent $8-$9 million trying to pass Proposition 1, which would have exempted them from fingerprinting and performing background checks on drivers -- the same regulations under which cab companies operate.
When that lobbying effort failed, the two companies disrupted their way out of town, leaving around 10,000 drivers out of work with less than 48 hours notice. (Good thing those drivers weren't employees, or the mass layoffs may have violated the WARN Act.) So what's next for Uber, Lyft, and the city that tried to hold them accountable for rider safety?
Austin Rideshare Limits
Prop 1 was designed by Ridesharing Works for Austin, a political action committee funded by Lyft and Uber, and was meant to repeal an existing ordinance passed last December. That law required all ride-hailing services accessible via apps to have prospective drivers fingerprinted as part of their national background check, and was passed in response to a spike in sexual assault claims against Uber and Lyft drivers in Austin.
So Austin never banned Uber and Lyft from operating in the city, it only told them that to operate here, you need to perform the same backgrounds checks as taxi, limo, and shuttle services. But that was just too much for these modern-day John Galts, who marshaled a massive political and PR push to get Prop 1 on the ballot. Fifty-six percent of voters said no to Uber and Lyft, and the companies made good on their promise to pack up and leave.
Disrupt or Dodge
Much of the profit margin for gig economy disruptors relies on ducking government regulation. Uber and Lyft have fought tooth and nail to keep their drivers from being classified as employees, to whom they would be responsible for overtime and other benefits. Those benefits would eat into their price advantage over traditional taxi services the same way a fingerprint requirement would.
Christopher David, CEO of Arcade City, a ridesharing service looking to cash in after Uber and Lyft absconded from Austin, put it bluntly (if verbosely):
Uber was the honey badger of 'ridesharing 1.0'. Laws didn't fit their model yet they operated anyway, eventually building enough consumer support to force changes in the laws ... In Arcade City we're excited to push that evolution forward as we pioneer decentralized 'ridesharing 2.0'.
In other words, Uber and Lyft skirted regulation until they were too big not to, and now Arcade City will skirt regulations applying to Uber and Lyft. Don't be so sure -- in the end, the law comes for us all.
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