Capitol Alert

California bill advances to regulate prices for Uber, Lyft

Sen. Ben Hueso, D-San Diego, center, in Sacramento on August 25, 2014.
Sen. Ben Hueso, D-San Diego, center, in Sacramento on August 25, 2014.

Legislation pushing state officials to regulate prices and do deeper background checks for companies like Uber and Lyft passed its first committee on Tuesday over tech industry objections.

Popular transportation companies that allow users to hail rides on apps have been battling an intensifying regulatory push in Sacramento. In perhaps the widest-ranging effort yet, Senate Bill 1035 would push the Public Utilities Commission to consider deeper background checks, price regulation and better accommodations for disabled riders. It would give peace officers more enforcement power over drivers, including the ability to impound vehicles.

The author of Senate Bill 1035, Sen. Ben Hueso, D-San Diego, has attracted deeper scrutiny for his actions on bills affecting the burgeoning ride-for-hire industry given his personal ties to the taxicab industry, where he worked for years. His brothers own a cab company. Last year he halted a bill allowing those companies to offer carpools despite the legislation having faced little resistance to that point.

Hueso argued his new bill would simply push the PUC to use its existing powers. Without more regulation, he said, “you create a scenario in which only certain businesses can stay in the market.”

“This is a very, very small start to create some very necessary consumer protections,” Hueso said, calling the bill a nod to “the popularity of the new services and the consumer demand.”

But business and tech industry groups lined up against the bill. A letter signed by Uber, Lyft, the California Chamber of Commerce and the industry umbrella groups TechNet and the Internet Association warned the bill in a way benefits no one in the State but taxi company owners.”

“This legislation does nothing to relieve the taxi industry from what they argue are onerous regulations, but rather attempts to dismantle an industry that is providing thousands of Californians work opportunities and transportation options,” the letter said.

Tech industry representatives objected to the bill broadening the PUC’s access to data, calling it an invasion of privacy. They have consistently objected to bills seeking to mandate broader background checks, arguing their internal vetting systems do a good job of protecting riders.

Opponents also warned price regulation would defeat the model that has allowed companies like Uber and Lyft to thrive. Prices for rides fluctuate depending on demand, rising to “surge pricing” levels during times of heavy ridership, and industry representatives said flexible pricing allows them to offer carpooling.

“The thought that we would be fixing prices for these companies is very dangerous from our perspective because that would upend the business model,” said Internet Association lobbyist Robert Callahan. “The business models are incredibly popular for the very reason the prices can fluctuate. They can be cheap, they can be affordable – they can also be more expensive. Workers appreciate that, the drivers appreciate that.”

Hueso argued that “the industry’s self-policing efforts” have led to “failures to properly protect the public.” He said variable pricing costs consumers and subjects drivers to wage uncertainty.

“You go out for dinner and the fare costs you $10, and you want to come home and then it costs you $60,” Hueso said.

The limousine industry joined with labor groups in backing the bill. Organized labor has clashed with tech companies over what they see as a lack of worker safeguards. The Teamsters, whose Seattle branch spearheaded an effort to unionize Uber drivers over the company’s objections, registered support for the bill.

“Even as minimal as the regulations are that apply” to ride-hailing companies, California Labor Federation lobbyist Caitlin Vega said, “they are largely unenforced by the PUC.”

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Jeremy B. White: 916-326-5543, @CapitolAlert