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IN FOCUS |
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by Matthew W. Daus, Esq. |
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Associate, Windels Marx Lane & Mittendorf, LLP |
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It is no doubt that transportation network companies ("TNCs"), such as Uber, have sought to push their way into cities and countries globally alleging that local regulations regulating for-hire vehicles do not apply to them. TNCs prefer to conduct their own background checks of drivers, set their own insurance and vehicle requirements, and repeatedly reference their proposed self-regulation as a newly "innovative" business model.
If only it were that simple. The truth is, this "innovation" has caused a multitude of regulatory issues for municipalities all around the world, and has led to a plethora of new laws and litigation. The approach and reaction to TNCs around the globe has not been consistent.
The United States media and politicians embraced TNCs as a Silicon Valley based creation; however, the reaction has been mixed on other continents, such as Asia and Europe. In these venues strong opposition has closed TNC operations, led to driver protests and even resulted in criminal charges against Uber company officials.
The reaction to TNCs in Canada, where in the last year there has been a strong and fast push by TNCs to enter several markets across the country, was not the same as in the US.
Social responsibility, respect for law and order, and the commitment to equity and fairness that Canadian officials often hold as values in high regard, were on full display in the manner various local and provincial governments reacted to TNC market entry north of the border.
Cities like Toronto, Calgary and Edmonton, among several others, have sought injunctions to stop Uber from operating while the governments collaborate with the company to develop a new regulatory framework though not always successfully.
The City of Toronto, for instance, filed a lawsuit against Uber arguing that Uber Canada is operating a taxicab brokerage and limousine service company. The court in this case found that, because Uber Canada is only minimally involved in the business transaction of hailing a ride, i.e. it lacks any role in "accepting" requests, Uber does not fall under the City's definition of a taxicab, taxicab broker, or limousine service company. As such, it is not required to apply for a license pursuant to the City's Code. As a result, the court dismissed the motion for a permanent injunction and allocated the costs payable to Uber.1
However, on October 2, 2015, the Toronto City By-laws were amended to remedy that deficiency, updating the City's existing taxi and limousine rules to apply to Uber. This meant that the company needed a brokerage license which it does not have. Even so, Uber continues to operate.
Similarly, the court in Edmonton denied an injunction against Uber, holding that the City of Edmonton did not demonstrate that Uber Canada was in a clear and continuous breach of the By-laws requiring a taxi broker license.
Uber was also met with criticism in Montreal where taxi drivers have held protests against UberX, arguing it has an unfair advantage and is compromising their ability to make a living. Montreal's Taxi Bureau has been ramping up its efforts to crack down on the popular TNC service. As a result, more than 400 vehicles have been seized in Montreal since the beginning of 2015, with 100 UberX cars seized in October 2015 alone.
The City of Mississauga recently took a bold lead in approaching the potential regulation of TNCs. Uber first made its entrance into the City of Mississauga in 2012, disagreeing with City officials who explained to the company that the Mississauga City By-laws did not allow it to operate. Uber jumped to its usual defense by claiming the By-laws did not apply because Uber is a technology company.
UberX launched in Mississauga, Ontario, the 6th largest city in Canada, in September 2014. Uber has continued to operate without licenses from the City. In an effort to resolve the regulatory issues and "level the playing field" between its taxis and TNCs, the City of Mississauga asked Windels Marx Lane &amq; Mittendorf to undertake a study to address the regulation of TNCs. This engagement was a mostly pro bono effort, and we hope that numerous Canadian cities and jurisdictions around the world will benefit from the comprehensive study undertaken.
The methodological approach for our report, entitled: "Study of Regulations for Transportation Network Companies (the "Windels TNC Study"), can be accessed at the following link: http://www.windelsmarx.com/public_document.cfm?id=446
The Windels TNC Study focused on reviewing public safety and regulatory principles to identify the role of the City:
(a) to protect the public; and
(b) to promote innovation and market efficiencies by encouraging the participation of new market entrants in the for-hire transportation industry.
We analyzed primary data collected from regulators, the incumbent industry, new market entrants, the riding public, and other sectors with a vested interest in the success of the for-hire industry as a whole. We presented the initial report at the City of Mississauga's Public Vehicle Advisory Committee on October 1, 2015, allowing stakeholders to solicit comments. We created a master list of issues raised at the public summit in order to undergo visioning exercises with relevant City officials.
The Windels TNC Study also discusses the current state of the market, the history of the smartphone app movement, international regulatory responses, and examines litigation involving TNCs.
The Windels TNC Study analyzes the following factors and provides policy options and considerations to the City, the pros and cons of each option, as well as the regulatory costs and jurisdictions where similar options have been or are being implemented.
The following are the specific regulatory options presented to the City:
Our report was presented to Mississauga's Public Vehicle Advisory Committee ("PVAC") for comments and input to form the basis of a report for the City of Mississauga's General Committee ("GC"). The GC considered the report at its meetings on March 2, 2016 and March 9, 2016, and made the following recommendations:
A copy of the report was also forwarded to the Premier of Ontario for consideration, as part of a potential Province wide solution for all of Ontario.
Mississauga could become the first city in the Greater Toronto Area to fully regulate Uber and other ride-hailing companies.3 After a review of our Study, Mississauga city staff has recommended creating a separate category of licensing that would require Uber drivers to undergo the same police background check and training as traditional drivers, as well as obtaining "equivalent" insurance,4 in line with our second policy option described above.
Drivers would also be required to provide proof of vehicle inspection every six months. In August 2015, Kitchener-Waterloo became the first city in Ontario to propose a TNC By-law with the public and industry stakeholders participating in the consultation process. 5
The By-law amendments would require TNC drivers to obtain taxi licenses and equip their cars with GPS and closed circuit cameras, complete sexual assault prevention training, and obtain commercial insurance with a policy value of at least $2 million.6 7 TNC vehicles will not be required to have a meter installed, but also will not be authorized to hail rides.8
In February, Calgary legalized ride-sharing by adopting new regulations which closely model the regulations being voted on in Mississauga. 9 It remains to be seen how remaining Canadian jurisdictions will move forward on the TNC issue, though we are confident Mississauga will be closely watched by other regulators in Canada and beyond.
