After New York City’s war with Amazon, Uber could be next

Emma G. Fitzsimmons, The New York Times

Posted at Feb 20 2019 03:41 PM

After New York City’s war with Amazon, Uber could be next 1
FILE -- A for-hire vehicle driver near a taxi garage in Brooklyn, Aug. 9, 2018. Mayor Bill de Blasio wants to extend the cap on Uber vehicles, prompting Uber to sue the city in February 2019 to overturn the law. Dave Sanders, The New York Times

NEW YORK — After New York City and Amazon went to war over a new campus in Queens, the city is heading into battle with another tech giant: Uber.

Mayor Bill de Blasio approved a yearlong cap on Uber vehicles last summer, making New York the first major US city to rein in the booming ride-hail company. Now de Blasio wants to extend the cap, prompting Uber to sue the city last week to overturn the law.

Uber has fiercely opposed the cap, arguing that it hurts New Yorkers who rely on the app, especially outside Manhattan, where there are fewer transit options. The lawsuit called the city’s regulatory approach “unfortunate, irresponsible and irrational.”

De Blasio, a Democrat with presidential ambitions, responded by saying the city’s new rules — both the cap and a measure to raise wages for drivers — were needed.

“No legal challenge changes the fact that Uber made congestion on our roads worse and paid their drivers less than a living wage,” said Seth Stein, a spokesman for the mayor. “The city’s new laws aim to change that.”

Like many other cities across the world, New York is struggling to respond to the explosive growth of the ride-hailing industry. The influx of vehicles has raised concerns about street congestion, working conditions for drivers, the decimation of the yellow cab industry and the siphoning of riders from public transit.

The lawsuit comes at a critical moment for Uber and its main competitor, Lyft, as both companies rush to go public. Uber, which could be valued as high as $120 billion, is likely to be one of the biggest-ever public offerings by a tech company.

The two ride-hail companies have bristled over new regulations in New York, Uber’s largest market in the United States. Lyft recently sued to stop the rules aimed at raising driver pay.

Uber and Lyft are also battling each other to dominate New York’s thriving bike markets. Lyft bought Motivate, the company that operates CitiBike, the city’s popular bike-share program. Uber bought another bike company called Jump and began offering electric bikes in the Bronx and Staten Island.

Uber supports the driver pay rules, but argued that the cap hurts drivers who want to join its app.

“It is disappointing to see the de Blasio administration remain singularly focused on a cap that evidence suggests is doing nothing to relieve congestion while preventing thousands of New Yorkers from earning a living wage,” Josh Gold, a spokesman for Uber, said in a statement.

Some business leaders worry that Amazon’s decision to abandon its deal with New York could hurt the city’s image as a tech hub.

But Nicole Gelinas, a senior fellow at the Manhattan Institute, said the struggle with Uber is not a tech issue — it’s about worsening street traffic.

“We’re not really afraid of being branded anti-tech,” Gelinas said. "In the long term, our problem is how do we deal with all of this growth — and not the risk that we’re going to drive away that growth with a little bit of rhetoric and a little regulation.”

De Blasio has a bitter history with Uber. When the mayor first proposed a cap in 2015, Uber launched an aggressive attack, introducing a “de Blasio view” in the company’s app to blame him for long wait times. Uber won the debate and became shorthand in his administration for an embarrassing defeat.

But Uber was on the defensive last year when the cap idea was revived by Corey Johnson, the City Council speaker. Uber’s reputation had been harmed by accusations of gender discrimination and other scandals. It hired a new chief executive and a new leader for New York to try to improve its image.

The number of for-hire vehicles in the city has surged to more than 100,000 vehicles, from about 60,000 in 2015. But while Uber and other companies are flourishing, many of their drivers are not. About 40 percent of drivers have incomes so low that they qualify for Medicaid and about 18 percent qualify for food stamps, according to a study by prominent economists last year.

The cap was expected to last a year while the city studied the proliferation of ride-hail trips. At the end of that period, the city’s taxi commission would review the number of vehicle licenses and decide on how they would be regulated.

Last month, de Blasio said in a radio interview that he wanted to “put ongoing caps in place on the for-hire vehicles.” Officials at City Hall confirmed that the mayor was considering extending the cap.

Uber’s lawsuit argues that it was not legal for the city to delegate the power to cap vehicles to the taxi commission. If Uber cannot meet growing rider demand, the lawsuit says that could hurt the state’s efforts to raise money for the subway through new fees on ride-hail trips.

The lawsuit, filed in state supreme court in Manhattan, questions the city’s motives: “This is less a ‘study’ and more a ‘post hoc rationalization’ of a remedy the city appears to have already selected.”

Lyft also opposes a permanent cap. “Any extension of this misguided policy would do even more significant, long-term damage to drivers and riders,” Lyft said in a statement.

The City Council is proud of the new regulations imposed on the ride-hailing industry and had the authority to approve them, said Jacob Tugendrajch, a spokesman for Johnson. The speaker, his office said, wants the taxi commission to make a decision about any future limits on vehicles based on data from its study.

The city’s taxi commissioner, Meera Joshi, recently announced that she was stepping down in March. Her successor will have a powerful role in determining the industry’s future.

In a separate lawsuit, Lyft challenged the city’s rules to raise driver wages to more than $17 an hour. Lyft claims the rules give Uber an unfair advantage because it judges companies differently based on their “utilization rate,” or how often drivers have a passenger in their car versus driving around empty.

The approach gives “the largest company with the biggest market share a built-in and perpetual advantage over companies with lower utilizations,” Lyft’s lawsuit said.

Lyft has sold itself as the more ethical ride-hail option. But the lawsuit hurt its image among some riders like Brad Lander, a councilman from Brooklyn, who said he deleted the app.

After facing harsh criticism, Lyft announced that it would comply with the new pay rules while its legal case proceeded.

Uber and Lyft say they care about public policy, but the lawsuits show their first priority is self interest, said Bruce Schaller, a former city transportation official who has closely studied the industry. The companies face a difficult challenge of balancing both profits and their public image. In this case, Schaller said, Uber chose to protect its bottom line.

“Uber in particular has been playing super nice since its change in management a year ago and particularly as they get closer to the IPO,” he said. “Suing the biggest city in the country isn’t playing super nice.”