Tuesday, September 3, 2013

Make the rule or your rivals will: Uber vs. taxis

In the past, we have blogged about how Uber took advantage of inefficiencies caused by taxi regulation to come up with a more efficient way of getting consumers to where they want to go.  Now that the incumbent taxis have fought back, using the regulatory machinery of the state utility commissions, the FTC, a federal agency is pushing back against the state regulators:

  • One proposed rule change would create a barrier to the entry ...
  • Another proposed change would require ... a specific fixed price.  ..., this change would prevent companies from adopting new forms of variable pricing that might be more responsive to consumer demands for transportation service.
  • A third proposed change would...  likely would prevent many consumers from using a smartphone application to get transportation service quickly, especially in downtown and “urban village” areas.
At least one agency of the Federal Government is trying to protect your interests.

DISCLOSURE: I used to work at the FTC.


  1. They "recommend that a motor vehicle regulatory framework should be flexible and adaptable in response to new and innovative methods of competition".......makes me think of the Post Office in a way. If the way you've been doing it no longer works, then devise a better way or, in this case, get the rules changed. I read a related article about how difficult it has been to change those regulations - some companies are benefitting from those rules apparently.

  2. State regulators are in favor to these rules due to pressure from the taxi industry and the erosion of the profits that the taxi industry is experiencing. At one point the taxi industry thought they had a sustainable competitive advantage until Uber developed a business model that hindered their profit margins. It isn't surprising that taxi industry would want a more regulated
    market for Uber and any other potential competitors due to the decline in the demand for their services. In limiting competition through regulation they make it more difficult for new entrants to be successful.

    All these proposed changes are a direct manifestation of the competitiveness that Uber has developed. They have capitalized on the inefficiencies of the taxi industry and differentiated their product while allowing variable pricing and lower costs to the traditional transportation market.