Say goodbye to cheap rides in D.C.
by Max Thomson · The Washington TimesOPINION:
One of Washington’s most innovative ride-hailing companies was just forced to cease operations in the District after a yearslong legal battle. D.C. residents ought to be mystified as to why the city isn’t bending over backward to accommodate the truly affordable transportation model.
The company is called Empower, and it’s similar to Uber. Through an app, riders connected directly with nearby drivers for on-demand trips, but unlike Uber, Empower doesn’t take a cut of each ride. Instead, drivers pay a flat monthly subscription to use the platform and keep 100% of their fares.
Its novel business model has dramatically lowered prices.
On average, rides in the District were 20% cheaper than Uber and Lyft, but frequent riders know the savings were often much greater. A trip across the city might put you out of $30 to $40 on Uber. You would have been hard-pressed to find an Empower for more than $20. (Although the app is still available elsewhere, it is embroiled in other legal fights, including in Maryland and New York City.)
Because the Empower corporate office isn’t taking a cut, drivers have been earning more. The New York Times found that Empower drivers earn about 30% more on similar trips than they would with Uber or Lyft.
So riders were paying less, and drivers were earning more. That’s a rare win-win.
It’s a free market answer to rising transportation costs, but the city shut it down anyway.
Empower’s downfall stems in part from a mess of municipal bureaucracy. The District’s Department of For-Hire Vehicles requires companies connecting riders and drivers to register as “private vehicle-for-hire” operators, a category designed for platforms such as Uber and Lyft.
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Empower refused to register. It said that because it doesn’t take a cut of any ride, doesn’t control pricing and doesn’t process payments, it’s not a ride-hailing company. It’s a tech company that licenses its software to independent drivers, it said.
Whether Empower has a sound legal argument, which the court found it did not, doesn’t matter. Burdensome regulation shouldn’t be killing innovative companies.
In a creative but futile attempt to comply with the court order, Empower recently started offering free rides. It argued that with no money changing hands, it wasn’t technically operating a ride-hailing company at all.
A D.C. court agreed with the company Thursday, but because no one will drive without pay, the company’s presence in the city is sputtering to a halt anyway.
With Empower gone in the District, riders have been forced back onto the duopoly of Uber and Lyft, where dynamic pricing during “surging demand” (i.e., whenever you would want to order one) artificially inflates prices.
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So what, exactly, has the city accomplished by forcing Empower out in Washington? Fares are now higher. Drivers are stuck shelling out more than a quarter of each fare to Uber and Lyft. The only tangible difference is that one of the few cheaper alternatives has disappeared.
To be clear, the city has a legitimate interest in regulating ride-hailing companies. Background checks, insurance requirements and basic safety standards are crucial.
Yet ensuring these protections need not require Empower to register with the government. There is no reason those rules couldn’t be applied directly to drivers and vehicles, just as the city does with other independent drivers.
Maybe, like Uber before it, Empower will have to spend years fighting entrenched incumbents and outdated regulations before it can operate. Or maybe the District can learn from the past and just let the market be.
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Either the law in the nation’s capital must change, or the city needs to interpret it more flexibly, but the current outcome is hard to justify as anything other than a gross policy failure.
• Max Thomson is a Washington-based public affairs specialist. He is a recent graduate of the University of Virginia’s Frank Batten School of Public Policy.