Georgia Supreme Court sides with Uber and Lyft: “Appellants are not entitled to an unalterable monopoly”

georgia supreme court bench

Seven days ago, the Georgia Supreme Court dealt a blow to the taxi cab industry by telling them that their certificates of public necessity and convenience (CPNCs) did not grant them a monopoly on the pay-for-a-ride industry.

It’s no secret that the heavily-regulated taxi cab industry hates the ride sharing industry.  After all, while background checks, a safe vehicle, and a solid driving record are still required to drive for either of the private ride share companies, you don’t need the state-issued medallion, which in Atlanta, drivers may either purchase or rent.

As of this article, number of available CPNCs stands at 1,600:

Sec. 162-61. – Number limited; costs.

(a)  The maximum number of taxicab CPNC’s outstanding shall be 1,600, which is the number of CPNC’s issued as a result of the legislative limitation established in 1995. This limitation is specifically based upon the relationship between the number of taxicabs operating within a geographic area and the quality of service they provide. An excessive number of taxicabs results in a reduced level of service and more passenger complaints.

(b)  The maximum number of animal-drawn vehicle CPNC’s outstanding shall be 31, which is the number of CPNC’s issued as a result of the legislative limitation established in 1995. This limitation is specifically based upon the quality of service provided by animal-drawn vehicles and upon the necessity for humane treatment of the animals involved.

(c )  The market value of any type of CPNC will be determined on January 1 of each year. For purposes of this article only the term “market value” shall mean the value calculated by the department based upon the sales prices for each CPNC during the prior year.

Three conclusions can be drawn from this section alone:

  • In 1995, the legislature imposed a cap on the number of available CPNCs, whose value is determined by the number available (supply and demand).
  • While the market value is determined by a formula whose data includes previous year sales, the initial sale price had to be established.
  • Since cab drivers could opt to sell their medallion in exchange for working for ride sharing services, it’s only natural that the price and intrinsic value of a medallion could drop.

The state made two arguments:

“Appellants contend on appeal, as they did below, that the CPNC system granted them an “exclusive right” to operate “vehicles for hire” within the City of Atlanta and that it was this exclusivity that created value in the CPNCs”

Translation:  The CPNC system created a monopoly for taxi cabs pre-ride sharing, thus conferring an artificial value on the credential.  Keeping in mind, much like an industry certification, it has no resale value, but rather the value of having it for marketability.

“Though, the city of Atlanta capped the number of CPNC’s at 1,600, the ordinance setting the cap reflects that the limit arises out of the correlation “between the number of taxicabs operating within a geographic area and the quality of service they provide” and that “[a]n excessive number of taxicabs results in a reduced level of service and more passenger complaints.”

Translation:  If the city allows too many cabs to operate, service will suffer and we’ll hear complaints from passengers.

The Court responded aptly with,

“Applellants have pointed to no law that would have prevented the City of Atlanta or the legislature from increasing the CPNC limit (and thus, the number of drivers) as those variables changed, and there is no reasonable basis to conclude that any property interest Appellants may have in their respective CPNCs extends to exclusivity or a limited supply of CPNCs.”

The variables included city boundaries, quality and level of service, and consumer passenger complaints.

Translation:  Today, if the legislature truly wanted to compete with ride sharing services, the taxi industry could lobby the legislature to increase the number of CPNC’s.  Furthermore, simply having a CPNC doesn’t put you in a special class, nor does it confer an exclusive right to be a taxi driver, since having one is required to operate a taxi in the first place.

This is where ride sharing has an advantage:  They don’t own any taxis for which to need CPNCs, the drivers are considered independent contractors who simply agree to certain terms, conditions, and policies, as a condition being allowed on the platform, and each driver is using their own vehicle and the expenses that come with vehicle ownership.  If anything, Uber and Lyft are currently proving that the licensing scheme functions more as a revenue generator, than a check on public safety.

I could see if Uber, Lyft, or any other ride share company were apathetic to safety, or refused to follow the laws of the states where they operate, but both seem to have direct policies, and a means for a passenger to file a complaint if necessary.  What remains is a rivalry between a deregulated, free market system, and a bloated, outdated system that would rather take ride sharing to court, than find ways to effectively compete.