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Uber, Lyft argue new regulations will stifle business models

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In this Jan. 4, 2013 photo, Lyft passenger Christina Shatzen gets into a car driven by Nancy Tcheou in San Francisco. (Jeff Chiu/AP photo)

Innovation is at the heart of the so-called sharing economy, and now Uber and Lyft are fighting state regulations they say will stifle the tech revolution.

Uber, Lyft, taxi companies and San Francisco government are duking it out at the state level over exactly what new regulations should be required of “ride-sharing” companies, known legally as Transportation Network Companies. These are the apps that allow people to electronically hail rides.

The regulator, the California Public Utilities Commission, solicited responses from interested parties on what these new regulations should be. As of the end of June, Uber, Lyft, taxi companies and the San Francisco Municipal Transportation Agency had all filed comments.

The SFMTA regulates taxis in San Francisco, but has no direct oversight of Uber, Lyft and other ride-hails. Still, the agency was a key party in offering insight to the CPUC in its first draft of regulations for the companies.

Though some last-minute comments are still pending, the CPUC is now at a turning point. The agency will compile the comments to formulate new regulations for ride-hails by the end of next year.

The proposed regulations include more rigorous vehicle inspections, fingerprinted criminal background checks, more protections for unaccompanied minors and more data reporting to the state.

A central thread running through all of the proposals is Uber and Lyft’s calls for the state to not “stifle innovation.”

“If a proposal for rule change is considered,” Lyft’s attorneys wrote to the CPUC, “it needs to be carefully weighed against any harmful impacts it may have on innovation and consumer services.”

The ride-hail industry is booming — Uber is valued at $50 billion, according to reports — and many of the companies are based in San Francisco, including Uber and Lyft.

Uber and Lyft’s innovation to connect drivers and passengers via smartphone apps has led taxi companies nationwide to rethink business strategies, said Dave Sutton, the head of Who’s Driving You?, a taxi advocacy group. In New York City, he noted, Uber and Lyft face steep regulations.

Sutton said regulations are not about “holding them to task or punishing them,” but maintaining safety for the public.

Below, The Examiner pulled quotes from Uber, Lyft and the San Francisco Municipal Transportation Agency’s arguments to the CPUC to highlight their thoughts on new regulations.

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In its filings with the state, Lyft argued inspections by automotive technicians would be an “unnecessary” cost on low-income drivers. As of now, Lyft conducts inspections through Lyft “mentors,” who are drivers with inspection training. Similarly, requiring cars to have more obvious signage to indicate they are for-hire vehicles would be onerous to those drivers who seldom use the service, Lyft argues.

Addressing a call for more data to be shared with the state, Uber’s attorneys argued that “trade secrets” would become vulnerable. Uber also repeatedly used innovation to defend its positions.

The SFMTA challenged those arguments by saying innovation will not be stifled by making the public safe.

“TNCs are likely to assert that requiring fingerprint-based criminal background checks will ‘stifle innovation’ because they are more expensive to process than using a driver’s social security number,” the SFMTA wrote in its filings. “That argument is baseless — the innovation is already here and the incremental added costs of fingerprints will not turn the clock back.”

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