At a recent conference, regulators and car services from the United States and Europe talked about how smartphone apps are changing the hire-a-car business. Some are integrated with car companies’ dispatching systems, while others allow drivers to directly connect with passengers, phone to phone.
While regulators discussed ways to clarify the legality of the apps, they also proposed guidelines that would effectively force Uber, a San Francisco start-up, to cease operations in the United States. Uber also faces lawsuits filed by San Francisco cabdrivers and a Chicago car service and a $20,000 fine in California.
The battle underscores the tension between lawmakers and technology companies as websites and mobile apps outmaneuver old rules. Services like Uber, Airbnb, and Craigslist can cut out the middlemen and lead to more efficient markets. But regulators say they could put consumers at risk.
Uber has an unusual approach. It first consults a lawyer in a target city on whether it is legal to operate there. It contacts local car service companies to discuss working with them; in cities where Uber works with cabs, employees put up fliers or approach drivers. Participating drivers get free iPhones that run Uber’s navigation software, which helps them find people nearby who are requesting rides via smartphone.
The start-up, which has raised $50 million since 2010, generally does not consult regulators. It says it’s not an actual provider of rides and isn’t subject to such regulation. To date, this has generally worked for it in 18 cities, including San Francisco, Washington, New York, Chicago, Paris, and Amsterdam.
Uber suffered its first serious setback in New York, where it was forced to cease its fledgling yellow cab operation in October because of what the city said were exclusive contracts with payment processors. But the company continues to work with luxury sedan companies and drivers there.
Matthew W. Daus, former chairman of New York’s taxi commission and president of the International Association of Transportation Regulators, is a vocal critic. With support of 15 city governments that formed a task force called the Smartphone Apps Committee, he wrote guidelines for laws that, if passed by the cities, would outlaw Uber’s operations. Daus said Uber is a ‘‘rogue’’ app and that the company behaves in an unauthorized and destructive way. He pointed to Uber’s doubling of fares in New York after Hurricane Sandy. The company calls it surge pricing, a move the start-up said was necessary to get more drivers on storm-ravaged roads.
‘‘New Yorkers deserve an apology from Uber for price-gouging them,’’ Daus said.
There are dozens of other car-summoning apps. Lyft, from Zimride, allows ordinary citizens to give rides to others in their own cars in return for ‘‘donations.’’ SideCar offers a similar service. Like Uber, these companies are facing a $20,000 fine by the California Public Utilities Commission for operating without a license.
But Uber is generally adored by customers, who say they’ll pay extra to summon a ride without much wait, especially where cabs are scarce. In Apple’s App Store, Uber has hundreds of five-star ratings.
Cofounder Travis Kalanick, 36, frames it as David vs. Goliath, a start-up revolutionizing a creaky business. He once referred to Cambridge, Mass., as ‘‘home to Harvard, MIT, and some of the most anticompetitive, corrupt transportation laws in the country.’’ To him, regulators are trying to stifle innovation. He says they are more interested in protecting the taxi and limousine businesses than in helping consumers.
Regardless of the motivations of taxi companies and governments, their actions stand in the way of innovation, said Daniel Sperling, a professor at the University of California Davis who directs its Institute of Transportation Studies.
‘‘Transportation has been one of the least innovative sectors in our society,’’ he said. ‘‘When I look at these new mobility companies coming, where they’re using information and communication technology at a very high level, it’s long overdue and should be embraced.’’