Lyft Drops Its Threat to Enter the New York Market

There has certainly been a lot of talk about taxi apps on smartphones, and with that talk there is much confusion.  An app is just a way of hailing a vehicle. The real question is what vehicle is being hailed and who is driving it. Some apps hails cars licensed as taxi driven by licensed taxi drivers. Others hail anyone but.

Lyft, a major player in the taxi app space (to borrow a word from the heyday of the tech bubble) calls itself a "ride sharing" company. Its drivers are not licensed as cabdrivers; they drive their own cars, which are also unlicensed, at least not licensed as taxis. Because they are not taxis, the don't need taxi licenses. It says its drivers take "donations," not fares.  That's the theory at least.

But when Lyft announced plans to launch in Gotham, the TLC had a cow.

Earlier this month, Lyft said it would move forward with its New York City launch despite threats from taxi regulators, not just the TLC, but state regulators. That assertion prompted the TLC to declare Lyft an “unauthorized service” in New York City.

“Lyft has not complied with T.L.C.’s safety requirements and other licensing criteria to verify the integrity and qualifications of the drivers or vehicles used in their service, and Lyft does not hold a license to dispatch cars to pick up passengers,” the TLC said in a statement.

“Unsuspecting drivers who sign up with Lyft are at risk of losing their vehicles to T.L.C. enforcement action, as well as being subject to fines of up to $2,000 upon conviction for unlicensed activity,” it added.

In short, the TLC said it would seize Lyft cars, which is not an idle threat because the TLC seizes close to 30 cars a day.

Later, Lyft backed down in the face of cease and desist letter from New York’s Department of Financial Services, joined by the NY attorney general.

Meanwhile, Uber, probably the richest of the taxi app companies, has already gained a foothold in new York by taking advantage of a pilot program that allows app-hailing of some yellow cabs. Uber and similar services can also be used to summon livery cabs, which, under New York rules, cannot accept street hails, but can be hired by "pre-arrangement" whether by a traditional phone call or a smartphone app.

Oops! -- TLC seizes hundreds of cars in error

The Taxi and Limousine Commission seizes more than 9000 cars per year-- all without a hearing and without a warrant. The TLC will give the car back to those who quickly plead guilty and pay $600. If you want to plead not guilty, you can get your car back if you pay $2000.

Now it has been revealed by reports in DNAInfo by James Fanelli and others and in the New York Post by Rebecca Harshbarger and Kathleen Cullito that the TLC lost almost 1,500 court hearings in 18 months in which TLC inspectors seized cars and falsely claimed they were illegal cabs. The TLC's own tribunal dismissed 20 percent of the 7,187 cases involving illegal-cab violations, according to a TLC tribunal spokeswoman. The 20 percent figure almost certainly overstates the true error rate because many drivers plead guilty because they are told that doing so is the quickest and easiest way to get their car back.

The increase in rogue seizures, the Post says, came about because chiefs and captains bullied officers to seize as many cabs as possible. Many examples of inspectors making bonehead plays under pressure have been in the news, as have reports of inspectors being hounded to seize cars often on flimsy evidence.

As DNAInfo notes, TLC inspectors often seize cars where the driver or the passenger doesn't speak English and the inspectors don't have a translator to help understand the situation. Often inspectors don't know or can't be bothered with the rules, such as those that allow New Jersey of Long Island cabs to make pick ups outside New York City for trips into the City. Another common mistake is to seize cabs driven by chauffeurs or cars serving a particular business, neither or which need TLC licenses.