Brew City Taxi Wars: The Fight for Transportation Freedom in Milwaukee
The Institute for Justice scores a big win against Milwaukee's taxi cartel, but does it matter?
The Institute for Justice (IJ), the nation's leading libertarian law firm, sealed its victory last week in a hard-fought case that will crack open Milwaukee's cab industry. Twenty-two-years ago, Brew City capped the number of cabs permitted to pick up passengers off the street at 321, which works out to about one taxi for every 1850 residents. (Washington,
D.C., by comparison, has about one cab for every 80 residents.) These permits—which aren't technically medallions but function the same way—sell for about $150,000 a piece. Taxi magnates Joe and Mike Sanfelippo own about half the total, which have a combined value of more than $20 million.
In its case, IJ represented three immigrant cab drivers suing for an opportunity to acquire their own cab permits on the grounds that the cap violuates the equal protection clause in the Wisconsin Constitution. Their win means the city will award 100 new permits to cabbies in a lottery next month.
Taxi cartels often thwart political reform efforts, but IJ's victory demonstrates yet again how the fight can be won in the courthouse. Over the years, IJ has scored wins to liberalize transportation poilcy in Denver, Las Vegas, and New York City. It's currently fighting cases in Portland and Tampa.
But there's an even more powerful tool for battling transportation cartels: technology. On Thursday, Uber, the high-tech car service that's upending taxi markets in cities all over the world, opened for business in Milwaukee. If the company's service proves as popular in Milwaukee as it has in other cities, an extra 100—or 100,000—cab permits won't matter much.
I'm reminded of the horse-railway operators that bribed their way into obtaining exclusive operating franchises in nineteenth-century cities. How much are those franchises worth today?
Milwaukee's cab wars are just getting started. There are rumblings that the city may sue Uber, and the Sanfelippo brothers are considering legal action. In a phone interview, Red Christensen, a vice president in the Sanfelippo brothers' taxi company, told me that "there's no need for additional taxicabs in this market," and that Uber is operating "in violation of city law."
"As a company that operates in the public trust," Christensen said, "our concern is for passengers getting into a car that doesn't have proper insurance, such as what happened with a six-year-old child in San Francisco." Christensen was referring to Sofia Liu, who was killed by an Uber driver on New Year's Eve. Taxi cartels in cities all over the country are shamelessly using this tragedy in an effort to undermine Uber and protect their own interests. (I recently wrote about this issue in The Daily Beast.)
IJ's Anthony Sanders, the lead attorney in the Milwaukee cab case, hasn't done a formal analysis of the issue, but says he doesn't think Uber is violating any laws because the company is only working with drivers already licensed to operate a car service in the city. Since Uber drivers don't pick up passengers that hail them on the street, they're not required to have one of the city's 321 cab permits.
In a statement, Uber said the service it's providing in Milwaukee "connects riders with commercially licensed and insured drivers."
Sanders says Uber's entrance into the city "presents all kinds of opportunities for entrepreneurs including my clients, and it should be very welcome for everyone except the existing permit holders."
Rob Montz recently covered D.C.'s Uber Wars for Reason TV:
Nick Gillespie and I covered a 2011 fight over a proposed medallion system in the district—a story that briefly landed me in jail.
