Rough Ride

Regulators punish a car service for charging too little.


David Groh, who drives a taxi while impersonating Elvis, seems to have struck the fancy of Seattleites. After a taxi inspector fined him for failing to live up to the city's expectations of what a cabdriver should look like, Groh filed a lawsuit that gave rise to "Free Elvis!" bumper stickers and persuaded the city council to loosen its dress code. "Uh, a-thank you verrah much," he said after the vote.

Like Groh, Daniel Steiner, who owns a five-car limousine business in Tampa, is fighting the arbitrary dictates of local transportation regulators. But the most surreal aspect of Steiner's battle is the government's demand: It wants him to raise his prices.

The Hillsborough County Public Transportation Commission insists that car services like Steiner's charge passengers at least $40 per trip, a threshold it says he has failed to meet under his contracts for transporting elderly and disabled patients to their medical appointments. The commission, which has prohibited Steiner from fulfilling the contracts and put his business on probation for six months, does not even pretend that sticking it to the old and infirm is in "the public interest." The official rationale for the rule is limiting competition.

According to the St. Petersburg Times, the commission's executive director, Gregory Cox, "says Steiner is interfering with others' efforts to make a buck" by "undercutting the business of cabdrivers who would otherwise field the cheaper service calls." This is like saying that Dell is interfering with IBM's efforts to make a buck by selling cheaper computers, or that Sprint is undercutting the business of AT& T by offering lower rates for mobile phone service.

There is nothing sinister about such interference and undercutting; it's the way markets work. But not in Tampa, where Cox says regulators strive to "keep a balance between the taxi industry and the limousine industry so that both remain solvent." As Steiner remarked after the commission put his business on probation, "They're saying that competition, the driving force of the economy, is unlawful."

To be fair, Hillsborough County is not alone in its medieval approach to economics. As University of Denver law professor Robert M. Hardaway observed in a 2000 law review article, the taxi and limousine businesses are "one of the few remaining fields of economic endeavor" regulated "for the specific purpose of limiting competition and protecting an incumbent oligopoly."

Hardaway noted that such regulations include New York City's limits on taxi medallions, which in the early 1990s raised their value to more than $150,000 each, and Las Vegas' restrictions on limousines, which created a situation where each company was serving 5.3 million visitors a year, compared to 109,000 in Los Angeles and 300,000 in Orlando. Artificial shortages like these benefit existing operators at the expense of consumers and potential competitors.

The same is true of Hillsborough County's price regulations. Steiner, who is challenging the transportation commission's disciplinary action with the help of the Pacific Legal Foundation, argues that the regulators have misinterpreted their own rules, which set a minimum price of $40 per hour, not per trip. Under their reading, a 15-minute ride to the doctor's office would cost the same as a one-hour trip, yielding hourly rates higher than insurers and clinics are willing to pay.

The upshot is that patients like Dorothy York, a 72-year-old with Parkinson's disease who attended the commission's hearing, will be left scrambling for a ride. "Don't cut him off," York begged the commission. "Let him continue helping old people such as myself."

For Steiner, who had been planning to expand his fleet with another five Lincoln Towncars, the commission's action could be the difference between thriving and going out of business, since the nixed contracts were his most important source of revenue. After immigrating to the U.S. from Brazil 20 years ago, driving a cab for a while, and working hard to build his business, Steiner is understandably dismayed that it could all be taken away by bureaucratic fiat.

"I see this country as being built on freedom to work and equality of conditions," he told the St. Petersburg Times. "The strength of the United States is its free market. This is against the American dream." The Pacific Legal Foundation argues that the commission's meddling is also against the U.S. Constitution—specifically, the right to pursue a livelihood guaranteed by the 14th Amendment.

So far there are no bumper stickers for Daniel Steiner, but there should be.