Despite recent cease-and-desist letters from state regulators, the founders of three San Francisco ride-sharing businesses said they will continue to operate their companies and voiced confidence that a resolution will be reached.
In August, the California Public Utilities Commission sent notices to SideCar, Lyft and Zimride — companies that allow passengers to ride in private vehicles for a suggested donation. Passengers and drivers connect via mobile applications. In 2010, the agency filed a similar complaint against the local ride-sharing company Uber, which also is still providing the service.
The notices said the companies violated provisions of state law prohibiting transportation services from operating without proper consent. If the businesses continue to operate, they could face daily fines of $5,000 and three months of jail time for each day the order is violated. They also could have their phone systems terminated, according to the letter. The notice to SideCar was issued Aug. 15, while the notice to Lyft and Zimride was sent Aug. 23.
Despite the notices, Lyft and Zimride founder John Zimmer said his businesses continue to operate normally. He said that since the notices were sent he’s engaged in very positive dialogue with agency officials. Zimmer said he’s working with them to devise a resolution and doesn’t believe the agency will fine his company or jail anyone.
“Zipcar faced the very same policy challenges when they were getting started,” Zimmer said. “And everyone agrees now that car-sharing models should be celebrated. We’re trusting that the CPUC will embrace the innovative spirit of California.”
SideCar founder Sunil Paul said his company is not a transportation carrier as defined by the CPUC. Instead, it’s a communications platform that lets passengers and drivers connect with each other.
“The CPUC has some serious enforcement tools that they can use,” said Paul, noting that his firm’s recent interaction with the agency has been positive. “But we’re not concerned because we’re convinced and certain that we’re operating a legal service.”
CPUC spokesman Andrew Kotch said no fines have been issued, but the agency can use an array of enforcement tools, including impounding vehicles or filing criminal complaints. So far, the agency has not taken those actions.
SideCar and Lyft both launched earlier this year in San Francisco. Passengers frustrated by the lack of available taxis in The City have relied on the services, which provide real-time information on available vehicles.
Taxi industry officials assail the startups as unregulated businesses relying on unprofessional drivers, complaining that they steal business from legally compliant firms.
Zimmer and Paul counter that their companies fill a necessary void left by the absence of available taxis and that their drivers receive extensive background screenings. Lyft recently purchased a $1 million excess insurance policy, and SideCar is considering a similar measure.
Both Lyft and SideCar are part of the so-called sharing economy, in which companies such as Airbnb and Park Please enable everyday consumers to offer everything from housing to parking for a price.