CHICAGO — An attorney for Chicago’s taxi industry on Monday argued to a federal appeals court panel that the city of Chicago has unconstitutionally enforced two sets of rules for the taxi and ridesharing industries, making it impossible for cabbies to compete with Uber and Lyft drivers.
The argument in front of the 7th Circuit Court of Appeals marked the latest effort by the city’s taxi industry to stem the financial tumult caused by the emergence of rideshare companies that some in the Windy City says is inching the legacy cab industry to the precipice of collapse.
Meanwhile, an attorney for three Chicago-area ridesharing drivers urged the appellate court to affirm an Illinois federal judge’s April decision to reject a preliminary injunction requested by city’s taxi industry that would have forced Uber and Lyft drivers to face the same regulations as taxi drivers—including the requirement they be fingerprinted, obtain a chauffeur's license, and undergo the same vehicular safety inspections as taxi drivers.
Michael Shakman, an attorney representing Chicago’s taxi and livery industry, told the appellate court that taxi industry revenue is down 45% to 50% as more than 90,000 drivers in the Chicago-area have registered with Uber and Lyft. There are about 6,800 active taxis in the city.
The long-winding Chicago case started in early 2014, when the coalition of taxi owners sued the city of Chicago, arguing the Windy City had set a double-standard by not enforcing the same regulations against drivers for ridesharing services that are in place for taxi drivers.
Chicago’s city council in June passed an ordinance that would require ridesharing drivers to get a special license, one that is easier to obtain than the chauffeur's license required for taxi and livery drivers.
The ordinance, which was pushed by Chicago Mayor Rahm Emanuel, was far weaker than what some members of Chicago’s city council were advocating for, including requiring rideshare drivers to acquire a chauffeur's license and be fingerprinted.
Instead, the recently passed ordinance requires rideshare drivers in Chicago to complete online training. The city also decided to further study the possibility of fingerprinting for rideshare drivers in the future.
In contrast, Chicago taxi drivers are required to take a class in-person that costs more than $300 and also be fingerprinted to obtain a chauffer’s license.
The weaker ordinance came as Uber and Lyft threatened to leave Chicago if more onerous regulations were passed in the city. The companies did just that in Austin after voters there rejected a proposal by the companies to self-regulate their drivers and mandated that drivers undergo fingerprint background checks and have emblems on their cars.
“What’s the rationale for having fingerprinting for one and not the other?” said Shakman, who represent the Illinois Transportation Trade Association, which includes dozens of licensed cab companies. “What’s the rationale for requiring a chauffeur’s license for one and not the other?”
The taxi industry also complains that the lack of regulation of ridesharing by Chicago and other cities has lead to owners of medallions—the city issued permit that owners of taxis must obtain to operate—seeing the value of their property diminish.
In 2013, the price of taxi medallions in Chicago peaked at $357,000. In April, a medallion was transferred between owners for $60,000. Taxi medallion owners in other cities have also seen the value of medallions plummet.
“It’s fundamentally unfair to the people who have played by the city’s rules since 1937,” said Shakman, referring to the inception of Chicago’s medallion system.
Judge Richard Posner, a member of the three member appeals panel, countered that it was absurd to assert that there aren’t fundamental differences between rideshare services and the taxi industry, which justifies different types of regulations.
At one point, Posner suggested that what is happening to the taxi industry was similar to what happened when to the “horse-and-buggy.”
“This is what competition does,” Posner said. “It wipes out industry.”
In a related case, the 7th Circuit also on Monday heard an appeal from the Joe Sanfelippo Cabs Inc., which had unsuccessfully sued the city of Milwaukee over its decision in 2014 to lift the cap it had placed on the number taxis that it would permit to operate in the city.
Sanfelippo and other legacy cab companies filed suit against Milwaukee that ending the cap devalued the taxi permit holders’ property without compensation. Milwaukee taxi permit holders had been able to sell the permits for up to $100,000 on the secondary market prior to the cap being lifted.
Anthony Sanders, a Libertarian public-interest attorney involved in the Milwaukee and Chicago lawsuits, said the two cases will play a critical role in determining how cities will approach regulation of the taxi and rideshare industries in the future.
“Deregulation is not a taking (of property),” said Sanders, with the Arlington, Va.,Institute for Justice. “There are serious questions about shackling taxi cabs to regulation, but the solution is not to shackle them on drivers like my clients. The solution deregulation of the taxi cabs.”
The appellate judges did not say when they would return with their decisions on the two cases.