Uber-Sticker

Just as dogs aren’t like cats, Uber isn’t the same as a taxi cab service. And there’s no reason that all of them should be regulated the same way according to a recent ruling by the U.S. Court of Appeals for the Seventh Circuit which blessed the Chicago ordinance which allows smartphone-based ride sharing services to operate in the city.

Since 2014, Uber and other transportation network providers [TNPs] have been governed by a permissive Chicago ordinance that allows for less regulation than that of taxi cab services. The TNP ordinance allows the ride share companies to set their own fares, while city rules regulating cabs doesn’t.

A group of taxi cab companies challenged the ordinance in a Northern District of Illinois federal court on seven grounds — including the allegation that the more permissive TNP ordinance regulating amounted to the city taking the plaintiffs’ property for public use as well as violating of equal protection laws. The trial court eventually dismissed all of the plaintiffs’ claims except two — the allegations that city denying equal protection to the taxi cab companies by governing them differently than Uber. Both the plaintiffs and the city appealed the ruling to the Seventh Circuit.

Richard Posner Richard Posner

And in its Oct. 7 decision in Illinois Transportation Trade Association v. City of Chicago, Seventh Circuit Judge Richard Posner concluded that all seven of the plaintiffs’ claims were “weak.”

“The first is that allowing the TNPs into the taxi and livery markets has taken away the plaintiffs’ property for a public use without compensating them,” Posner wrote.

“’Property’ does not include a right to be free from competition,” he wrote. “A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening.”

Posner also reversed the trial court’s equal protection ruling that favored the plaintiffs.

“Here’s an analogy: Most cities and towns require dogs but not cats to be licensed. There are differences between the animals,” wrote Posner noting that dogs are bigger and stronger and sometimes bite people, whereas cats are generally innocuous.

The problem with the trial court’s equal protection ruling is the judge assumed the taxi companies and Uber had the same business model.

“Just as some people prefer cats to dogs, some people prefer Uber to Yellow Cab, Flash Cab, Checker Cab, et al. They prefer one business model to another. The city wants to encourage this competition rather than stifle it as urged by the plaintiffs, who are taxi owners,” Posner wrote.

And because they services operate differently — you can’t hail an Uber driver by waiving at them on the street, just as consumers can’t screen taxi cab drivers through a smart phone app — the businesses deserve their own regulatory schemes, Posner concluded in the decision.

“There are enough differences between taxi service and TNP service to justify different regulatory schemes, and the existence of such justification dissolves the plaintiffs’ equal protection claim,” Posner wrote. “Different products or services do not as a matter of constitutional law, and indeed of common sense, always require identical regulatory rules.”