Economist Matthew Mitchell of the Mercatus Center at George Mason University has been closely following the battle between regulators and ridesharing companies like Uber and Lyft for several years.
In the wake of the Virginia DMV's decision to issue a cease and desist order to both companies, Mitchell (a Virginia resident) assesses the winners and losers:
- Winner: Local taxi monopolies. Cab companies have long benefited from regulations that restrict entry and from regulators who see it as their job to preserve these firms’ profits. The traditional model has been challenged in the last few years by Uber and Lyft, and depending on how long the decision lasts, Cab companies are going to be able to reclaim some of the customers they have lost.
- Losers: Uber and Lyft--and the multitudes of drivers who work with them--will clearly be harmed. This is why they are not likely to take this lying down.
- Losers: Customers. Uber and Lyft have been quite successful because they offer an innovative and convenient service and customers have flocked to them for that. Their customer ratings systems provided a degree of quality control that taxi regulators were never able to achieve.
Mitchell notes that these peer-to-peer platforms have tangled with municipal regulators in cities across the country where taxi lobbies are powerful. It is rare, however, for state regulators to take this sort of action.