Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Proposed D.C. Taxicab Rules Raise Potential Competition, Consumer Protection Issues: FTC Staff, (Jun 13, 2013)

By John W. Arden, J.D., LL.M.

While recent District of Columbia legislation appears to be designed to facilitate new and beneficial forms of competition for taxicab services, some rules proposed by the District of Columbia Taxicab Commission may unnecessarily impede competition, the FTC staff noted in a letter sent June 7 to the Taxicab Commission. The staff recommended that the Taxicab Commission avoid unwarranted regulatory restrictions on competition and that regulations should be no broader than necessary to address legitimate public safety and consumer protection concerns.

The proposed rules follow the enactment of the “Taxicab Service Improvement Act of 2012” and the “Public Vehicle-for-Hire Innovation Amendment Act of 2012,” which are intended to modernize Washington, D.C.’s framework for passenger motor vehicle transportation services.

Until recently, the marketplace for commercial passenger motor vehicle transportation services remained largely unchanged since the early 1980s, the letter observed. Primarily in response to the introduction of smartphones around 2007, software applications (such as mobile apps, Internet web pages, and text messages) have allowed consumers to arrange for, and pay for, commercial passenger motor vehicle transportation services in a variety of ways.

In response to these new options, the District of Columbia enacted the “Taxicab Service Improvement Act of 2012” and the “Public Vehicle-for-Hire Innovation Amendment Act of 2012.” The latter legislation provides for legal recognition of applications in Washington, D.C., exempting a “digital dispatch service” from regulation of the Taxicab Commission “other than rules and regulations that are necessary for the safety of customers and drivers or consumer protection.”

Competition Issues

The proposed rules that raise potential competition issues are:

Restrictions on vehicles operated as limousines. A proposed rule limiting the types of vehicles that can be operated as limousines to those weighing at least 3,200 pounds might exclude lighter-weight, more fuel efficient, and environmentally friendly vehicles from being used for “sedan services.” The FTC staff recommends that the Taxicab Commission consider the extent to which the requirement may impede competition and the extent to which the requirement is necessary to ensure safety or some other important consumer benefit.

Ban on digital dispatch services associating with branded taxicab association. A proposed prohibition on digital dispatch services associating with a branded taxicab association, unless the association agrees, may raise a competition concern. The FTC staff recommends that the Taxicab Commission allow for flexibility and experimentation in the ways that applications can affiliate with all types of transportation vehicle operators and organizations.

Prohibition of digital dispatch services’ “substantial change” without Commission approval. A proposed ban on digital dispatch services’ substantial change to dispatch or payment solutions for taxicabs or digital payment systems for sedans, without written approval of the Taxicab Commission, might unnecessarily burden and restrict the ability of digital dispatch systems to update their software in a regular, timely manner. The FTC staff questioned whether there were other less burdensome alternatives.

Requirement that digital dispatch services transmit detailed trip information to Commission. A proposed requirement that digital dispatch services transmit several pieces of detailed trip information to the Commission every 24 hours, via a single data feed, may inadvertently create barriers to entry. This requirement might also raise data security issues, according to the FTC staff.

Consumer Protection Issues

The proposed rules raising potential consumer protection issues are:

Requirement that passenger charges comply with disclosure requirements, do not greatly exceed estimated fare. A proposed requirement that passenger rates and charges for sedan services arranged through a digital dispatch service comply with disclosure requirements and not exceed an estimated fare by more than 20 percent or $25 would mandate that each digital payment unit provide passengers with a written electronic receipt containing fare information, other trip information, and information about the service. While these advance disclosures might be an efficient way to promote pricing transparency, any such requirements should be “reasonably tailored” to avoid inhibiting the entry and operation of applications.

Requirement that dispatch services store business records pursuant to best practices. A proposed requirement that all dispatch services store business records in compliance with industry best practices and applicable laws might not be flexible enough. The Taxicab Commission “may wish to consider the flexible approach that the FTC has taken regarding data security in its consumer protection law enforcement actions, consumer and business education, and policy activities relating to data security,” the letter said.

Ban on releasing information that would violate personal privacy. A proposed ban on releasing information that would result in the violation of personal privacy of a passenger did not elaborate on the prohibitions, their enforcement, or possible remedies. The Taxicab Commission may want to elaborate on the prohibitions, their enforcement, and the possible remedies.

The FTC staff expressed appreciation for the opportunity to provide its views and offered to address any questions the Taxicab Commission might have regarding competition and consumer protection in the transportation marketplace.

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