Competition Wins Out: Long Beach Drops Minimum Cab Fares in Response to Uber

Reductions in regulations benefit consumers.


"But what about mustaches? When can we put mustaches on our cabs?"
Credit: / photo on flickr

One of the ways the taxi cartels have responded to the incursions of ride-sharing services is to point out all the municipal regulations that tie their hands and keep them from being able to react in a typical free-market fashion. Taxis typically cost more than ride-sharing services, but that's because they have their rates are controlled by city government, not the taxi industry.

Of course, that argument completely ignores the role that the taxi cartels have had in creating such regulations and the bed they've thoroughly made for themselves in order to control this industry. But never mind that. Blame aside, it is factually true that taxi companies are not able to compete against companies like Uber and Lyft on its own terms. The solution, as many have argued, is not to burden ride-sharing services with more regulations but to remove oppressive regulatory control over taxi services. We've seen it in some states and cities that have gotten rid of limits on how many cabs can operate in communities.

This week Long Beach, California, took a new path. Its City Council voted unanimously yesterday to eliminate its minimum price for a taxi ride and to allow taxi companies to offer free and discounted rides. From the Los Angeles Times:

The vote makes Long Beach the first major U.S. city to eliminate the price floor that prevents taxi drivers from providing free or discounted rides. The maximum price remains unchanged. 

Yellow Cab officials said the shift would help its drivers better compete against Uber and Lyft. Both services set fares based on supply and demand. During periods of high demand, called "prime time" or "surge pricing," the companies raise prices to coax more of their drivers onto the roads. Discount codes are also common. 

As in most cities, taxi fees in Long Beach are set by city regulators, and do not fluctuate. Cabs charge a base fare of $2.85, plus $2.70 per mile. The policies were put in place to protect customers years ago, officials say — before Uber and Lyft existed.

"Taxicabs have had no opportunity to experiment and fail, or experiment and succeed," said William Rouse, the general manager of Long Beach Yellow Cab Cooperative Inc. "We as an industry find ourselves the reluctant participants in one of the great public policy debates that is going on today."

Note how the story simply allows the assertion that these policies were developed to "protect customers" without challenging or even engaging in this claim in any fashion. I find this to be remarkably typical of taxi vs. ride-share reporting. If it were true, why are customers aching for market alternatives?

Anyway, Long Beach is still keeping a cap on the number of taxis permitted to operate in the city, though they've increased the limit from 175 to 199. It's a mixed bag, but still an improvement.