Los Angeles Business Journal

Why L.A. Gave Red-Lights to Lyft, Uber, and Sidecar

By Tom Dotan Tuesday, June 25, 2013

Smartphone-driven ride-sharing services operating in the city of Los Angeles slammed into a bureaucratic brick wall this week.

On Monday, the city's Department of Transportation sent cease and desist letters to Uber, Lyft, and Sidecar, three ride-sharing operators that have been running in Los Angeles for several months – in Uber's case more than a year.

And in case that didn't register, a brief chat with L.A.'s taxicab administrator reveals just how serious the city is.

Despite the increasing popularity of these services, which let someone hail a private car using an app on a smartphone, Tom Drischler's take is anyone operating an unregistered taxicab service is breaking the law. According to the letters sent by the department, drivers are subject to arrest and their cars may be impounded.

The problem, Drischler said, is one of safety.

"We cannot verify that these companies are properly insuring the drivers or that the cars have been inspected," he said. "In our mind that poses a risk. Our top priority is public safety and we can’t guarantee to the public these operations are running thorough criminal history background checks of the drivers."

Spokesmen for the three companies each insisted that their companies run thorough background checks on drivers and provide adequate insurance. All three have said they will continue to operate in the city despite the order.

The Uber L.A. Twitter account tweeted an old Steve Jobs quote in response to the city's letter.

The move to ban Lyft, Sidecar, and to a lesser extent, Uber (the company runs a black car service, and some of its vehicles are registered), comes as a bit of a surprise. Though the services faced fights with other municipalities, including Austin, Texas, New York and San Francisco, L.A. had been laissez faire about these services until now.

Drischler explained that the department has been monitoring the companies for some time, though it did not consider taking action until recently, when the services began ramping up operations. Uber has been in L.A. since March 2012, Lyft began operating locally in January, Sidecar in February.

When the companies came to town, Drischler said they had no formal discussions with the city about how to operate.

"They're the ones that came into L.A. without a permit. They need to approach us," he said. "But that’s not how they operate; they just go into business."

Though the three have faced pushback from other California municipalities in the past, each has received a waiver from the state Public Utility Commission, which regulates taxicab services. The agreements are intended to be provisional while the state figures out the specifics of regulating ride sharing services.

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