California Puts Brakes on Ridesharing Apps
SideCar matches people who need rides with people who have empty seats.
Ridesharing apps take the community corkboard concept and bring it into the digital age. These apps connect those who need a ride with those who have one to offer. But state regulators are putting the brakes on them, and are also looking at other apps that allow people to rent out their apartments or take on odd jobs.
The idea of collaborative consumption—in the case of ridesharing apps, taking advantage of seats that would go unused—is that people can save money and energy while getting an importnat service. Although each is a bit different, ridesharing apps work in general by connecting passengers with drivers, who get money in exchange for providing a ride.
But some of these services are running afoul of state agencies, which could quash the benefits for people who use the apps.
The California Public Utilities Commission, for instance, has declared that the companies that coordinate rides in exchange for money cross the line from being helpful to being businesses. The CPUC issued cease-and-desist orders to ridesharing apps SideCar, Tickengo, Lyft and Zimride.
As the most populous and economically powerful state, California often influences policy throughout the U.S.
The CPUC says each of those services qualifies as a charter-party carrier — any person or entity that provides transportation service where the vehicle is rented and operated by a for-hire driver. By state law a charter-party carrier requires a special license plate.
The ridesharing services disagree with that classification. In a post on SideCar’s blog, founder Sunil Paul said the rideshare platform is donation-based.
“The SideCar community is an organic one, people helping people get around safely, conveniently and socially,” he wrote.
Logan Green and John Zimmer, who co-founded both Lyft and Zimride, say on Lyft’s blog that they designed their services to comply with the law and have been talking with the CPUC to explain how the services benefit the community.
Regulators throughout the country face questions about what to do with similar peer-to-peer marketplaces that offer services in exchange for money, such as Airbnb, where homeowners who have an extra room allow someone use the space, and Taskrabbit, where people can be found to run errands. These are new business categories that don't fit neatly within existing laws. But the companies could be subject to the California Money Transmission Act, which would require them to get a license for the services they provide — and are likely to lead to higher costs for people who use them.