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by Matthew W. Daus, Esq.
President, International Association of Transportation Regulators
Distinguished Lecturer, University Transportation Research Center, Region 2
Contact: mdaus@windelsmarx.com
156 West 56th Street, New York, NY 10019
T. 212.237.1106 • F. 212.262.1215


Will President-Elect Trump Change Direction with Federal Trade Commission Policy Towards Transportation Network Companies?

On June 9th, 2015, I was invited to speak at a Panel entitled, "The Interplay between Competition, Consumer Protection, and Regulation: Policy Perspectives" by the Federal Trade Commission ("FTC"), for a workshop on the so called "Sharing Economy". I spoke out against using the misnomer "Sharing Economy" for app-enabled for-hire vehicles such as Uber explaining that so called Transportation Network Companies (TNCs) like Uber and Lyft, never had, until recently and sparingly via the Uberpool and Lyftline services, actually shared rides at all.

Rather, they were and still are simply providing the same service as taxicabs and for-hire vehicles, delivering passengers from point A to point B (albeit faster and dispatched through a smartphone app). They should be regulated the same as the incumbent industry in terms of safety and consumer protection standards.

The video of this lively panel, where I engaged in a debate with Uber and Airbnb, can be viewed in its entirety at this link:

https://www.ftc.gov/news-events/audio-video/video/sharing-economy-workshop-part-3.

On November 17th, 2016, almost 2 years after the workshop, in the closing days of the Obama administration, the FTC published a staff report entitled, The "Sharing" Economy: Issues Facing Platforms, Participants, and Regulators[1] ("FTC report"). It expanded on the findings of the workshop.

The Obama administration originally expressed interest and concerns about the fairness of state and local transportation regulations allowing the incumbent taxicab industry to exist in a supply controlled market of limited medallions and local permits. However, since then, no official action was ever taken by the FTC, and TNCs such as Uber and Lyft quickly grew exponentially to dwarf the influence, size and market share of the incumbent for-hire ground transportation industry throughout the United States.

Uber's astronomical and quick growth may have rendered the initial concerns about closed taxi market dominance irrelevant given the passage of many state TNC laws. However, neither the new market dominance of Uber nor the less stringent licensing standards for TNCs, other than taxis and for-hire vehicles under new state laws, has led to any official public FTC action.

It remains to be seen whether the incoming Trump administration will become actively involved in the consumer protection and fair competition issues in the ground transportation technology arena. This article will summarize the findings and issues raised in the FTC report, and will analyze what we know so far about whether changes may be on the horizon in 2017 and beyond.

The FTC report addresses the "Sharing Economy" as a whole, to include any online platform that provides a marketplace to bring together buyers and sellers of goods and services. However, it focuses mostly on the transportation (Uber, Lyft, etc.) and hospitality (Airbnb) sectors.

The report explains that these platforms incorporate built in trust mechanisms to encourage buyers to use them confidently. These trust mechanisms usually come in the form of a rating system for sellers created through aggregating feedback from the buyers.


The full panel at the Federal Trade Commission Workshop on The Sharing Economy in Washington, DC, left to right: Julie Goshorn, Moderator and Attorney for the Bureau of Competition's Office of Policy and Coordination, FTC; Ashwini Chhabra, Head of Policy Development, Uber Technologies; Professor Matthew Daus; Brooks Rainwater, Director, City Solutions and Applied Research Center, National League of Cities; David Hantman, Head of Global Public Policy, Airbnb; Vanessa Sinders, Senior Vice President and Head of Government Affairs, American Hotel and Lodging Association; William "Bill" F. Adkinson, Jr., Moderator and Attorney Advisor for the Office of Policy Planning, FTC.



Professor Matthew Daus (center), debates Ashwini Chhabra, Head of Policy Development of Uber Technologies (left), while Brooks Rainwater, Director, City Solutions and Applied Research Center, National League of Cities (right), listens intently at the FTC Workshop.


Although panelists from the workshop agreed that these reputation mechanisms worked well to grow the sharing economy, some pointed out that they might be biased towards positive feedback or no feedback, instead of negative feedback. Also, feedback may be biased towards extreme experiences because many buyers will only take the time to leave feedback if they had a very good or very bad experience. Furthermore, the panelists commented that the ratings can be manipulated with people leaving fake negative or positive feedback.

The workshop participants provided some suggestions on how to mitigate these possible biases or misleading ratings. Panelists suggested that the platforms themselves should provide interventions to promote the trust of the buyers, such as background checks and insurance.

It was noted that because platforms benefit from increased transactions, there can be a conflict of interest in maintaining accurate ratings with an enhanced incentive to inflate the quality of users' reputations to increase business.

The report also discusses the ongoing debate on regulating these new online platforms. The FTC stated that regulators should aim to strike a balance between placing the necessary regulations to address consumer protection and safety concerns, while also encouraging innovation in their respective industries. However, in its report, the FTC did not specify which regulations are necessary and which are not.

At an Antitrust Law section meeting of the American Bar Association[2] held at the National Press Club on April 15th, 2015, I engaged in a robust discussion as a panelist with a panel that included a FTC representative. There was an acknowledgement of concerns about an "uneven playing field" between TNCs and taxicabs/FHVs on issues such as insurance and criminal background checks.

The FTC report sets forth the differing opinions stakeholders have on regulations with representatives of the new platforms at the FTC workshop advocating for lesser regulations. The report argues that their technological innovations make them different than the incumbent industry.

Many workshop participants agreed that drivers for TNCs must undergo a background check, yet there was much debate about who should be responsible for these checks, the company or the government. They questioned whether these background checks should include fingerprinting.

Providing access to the vast amount of data collected by the new marketplace platforms to regulators was also discussed in the workshop and report. It was agreed that regulators could benefit a lot if they had access to the data and be alerted to problems they can address. Additionally, the report raised privacy and data security concerns stemming from the platforms amassing such large amounts of data about their customers. The report recommended that the FTC provide guidance in this area.

Lastly, the report discussed how there is great room for improvement for TNCs and taxicabs to serve under served communities in suburban areas, and passengers with disabilities. Overall, the report provided a comprehensive recitation of the issues and set forth the differing opinions on regulating the markets involved. It did not, however, set forth a plan of action or direction for the agency or stakeholders.

A quick look back at history shows that the FTC was once involved in taxicab regulation issues in the 1980s. In 1981, the late President Ronald Reagan appointed James C. Miller III, as head of the Federal Trade Commission ("FTC"). Miller generally advised against regulation in the name of consumer protection.[3]

In 1984, the FTC released a report criticizing local taxi commissions for the lack of competition in the taxi market, and alleged this contributed to a lack of lower fare competition.[4] Armed with this report, the FTC brought lawsuits against the cities of New Orleans and Minneapolis, challenging their regulation of taxicabs as anticompetitive.[5]

The FTC alleged that these cities had colluded with private taxi companies to impose regulations increasing taxi fares, limiting the number of available licenses and engaging in other methods of unfair competition. Minneapolis avoided the lawsuit by acceding to the FTC and permitting more competition. New Orleans, however, succeeded in lobbying the state of Louisiana to authorize its regulatory paradigm.[6]

FTC commissioners have been vocal in criticizing taxicab and for-hire regulations in the wake of the rise of TNCs. Various FTC commissioners submitted comments[7] to the then District of Columbia Taxicab Commission ("DCTC").

FTC Commissioner Joshua D. Wright published a piece in the Washington Post harshly criticizing the taxicab and FHV regulations that were promulgated in 2013, describing them as anti-competitive and onerous for the new market entrants, Uber and Hailo at the time.[8]

Now, however, the future of ground transportation regulation under President-Elect Donald Trump is yet to be determined. Trump has not made any widely publicized comments in support of or against TNCs, although during his presidential election campaign his staff used Uber 56% of the time as compared to 44% being traditional taxicabs.[9]

Additionally, President-Elect Trump recently appointed Elaine Chao as the Secretary of Transportation, who has acknowledged Uber and Lyft in the past as job creators.[10]

The incoming President has yet to appoint his new FTC commissioners, but he has chosen Joshua Wright, a Republican and former FTC Commissioner, to head the transition of the FTC.[11] He is the same Commissioner who wrote the aforementioned Washington Post article. It remains to be seen what, if any, action the FTC will take under the new Administration. However, it appears poised to be more likely than not the "status quo" on the TNC issue.

  1. https://www.ftc.gov/system/files/documents/public_events/636241/
    sharing_economy_workshop_transcript.pdf

  2. American Bar Association, Washington D.C. 63rd Antitrust Law Spring
    Meeting, April 15-17, 2015.

  3. Eleanor M. Fox (1988), Chairman Miller, The Federal Trade Commission, Economics, and Rashomon. Retrieved from http://scholarship.law.duke. edu/cgi/
    viewcontent.cgi?article=3920&context=lcp

  4. Marvin Ammori (March 12, 2013). Can the FTC Save Uber? Slate. Retrieved from
    http://www.slate.com/articles/technology/future_tense/2013/03/
    uber_lyft_sidecar_can_the_ftc_fight_local_taxi_commissions.html

  5. Joshua D. Wright (September 6, 2013), Has the D.C. Cab CommissionForgotten Who It Serves? The Washington Post. Retrieved from https://www.washingtonpost.com/opinions/has-the-dc-cab-commissionforgotten-who-it-serves/2013/09/06/cb3d0c18-15a6-11e3-be6edc6ae8a5b3a8_
    story.html?utm_term=.a21c4126d01b

  6. Marvin Ammori (March 12, 2013). Can the FTC Save Uber? Slate. Retrieved from http://www.slate.com/articles/technology/future_tense/2013/03/
    uber_lyft_sidecar_can_the_ftc_fight_local_taxi_commissions.html

  7. https://www.ftc.gov/sites/default/files/documents/advocacy_documents/
    ftc-staff-comments-district-columbia-taxicab-commissionconcerning-
    proposed-rulemakings-passenger/130612dctaxicab.pdf

  8. Joshua D. Wright (September 6, 2013). Has the D.C. Cab Commission
    Forgotten Who It Serves? The Washington Post. Retrieved from https://www.washingtonpost.com/opinions/
    has-the-dc-cab-commissionforgotten-who-it-serves/2013/09/06/
    cb3d0c18-15a6-11e3-be6edc6ae8a5b3a8_story.html?utm_term=.0edb60f26e85

  9. Libby Isenstein (October 30, 2015). Which Candidates Are Taking Uber
    to Luxury Hotels? The Atlantic. Retrieved from http://www.theatlantic.
    com/politics/archive/2015/10/which-candidates-are-taking-uber-toluxury-
    hotels/448128/

  10. Kia Kokalitcheva (November 29, 2016). What Trump’s Secretary of Transportation
    Could Mean for Uber and Lyft. Fortune. Retrieved from
    http://fortune.com/2016/11/29/elaine-chao-transportation-uber-lyft/

  11. Alexia Fernandez Campbell (November 23, 2016). The Future of theFTC Looks a Lot Like Its Past. The Atlantic. Retrieved from http://www.theatlantic.com/business/archive/
    2016/11/trump-ftc/508535/

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