New technologies and the entrepreneurial spirit improve our lives every day. Among the latest and most significant innovations for urban dwellers are the peer-to-peer ridesharing apps Uber or Lyft. These apps lower passengers’ and drivers’ transaction costs by connecting them through their smartphones.
Uber’s quick global rollout of ride services has struck fear in the conventional taxicab industry, which is lobbying policymakers worldwide to prohibit such “non-licensed” mobility services. The industry, which has long benefited from monopolistic government licensing, says prohibition is necessary to “protect the customer,” but actually the industry wants to protect itself. From what? From consumers’ freedom to choice.
This is an old story. Licensing is always promoted as a benefit to consumers, when in reality it benefits only the few privileged service providers, who can charge higher prices when competition is artificially restricted.
The reaction to the new competition has been nasty. In some cities, such as Milan or Madrid, taxi drivers have directed violence and vandalism at Uber contractors and cars. In early June Europe’s taxi drivers orchestrated a continent-wide strike -- an odd way to hurt their competitors.
Their demand for protection from competition was challenged by activists from Students for Liberty (SFL) Berlin, who support the free market and entrepreneurship. Holding signs that said, “Taxi monopoly is so yesterday!,” the peaceful protesters chanted pro-competition messages.
The counterprotest was apparently welcomed by journalists on the scene, who thought they would spend hours in the rain covering yet another boring demonstration. Most major German news outlets reported on this pro-competition counterprotest.
Some taxi drivers, however, didn’t share the journalists’ enthusiasm and instead shouted angrily at the SFL activists, tossed coins, and ripped signs out of their hands. All the while, the taxi protest organizers passively stood by on their makeshift stage and watched.
The taxi industry should understand that the way to cope with new competitors is to improve service and lower prices. But it is doing the opposite. The Berlin Taxi Guild recently raised fixed rates by almost 7 percent. The industry asks for more protection and fights its competition in court not the marketplace.
How bizarre! Would Burger King halt selling Whoppers for a day to protest a new McDonald’s chicken sandwich? Would shoe retailers shut down for a week to protest Amazon’s online store?
The taxi industry's business model is hopelessly out of date (if it ever was appropriate) and needs to adapt to the 21st century, instead of relying on licensing to keep out competitors.
If this anti-competitive strategy had been used consistently in the past, we would still be riding in horse-drawn carriages and lighting our homes with candles, while monks copied books by hand.