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.