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Yet Another Federal Court Rejects Claims that Exposing Taxis to Competition from Uber and Lyft is a Taking
This is the latest in a series of federal court decision rejecting such arguments. The right to operate a taxi business does not create a "property" right in suppressing competition.
Over the last decade, traditional taxi cab company profits have taken a hit because of competition from ride-sharing services, such as Uber and Lyft. Some cab companies have tried to fight back by filing cases arguing that local governments that allow Uber and Lyft to compete with taxis have somehow violated the Takings Clause of the Fifth Amendment, which requires the government to pay "just compensation" when it takes "private property." On Monday, the US Court of Appeals for the Eleventh Circuit issued the latest in a long line of federal court decisions rejecting such claims. Nick Sibilla of the Institute for Justice has an excellent summary of the ruling and its significance, in Forbes:
In a resounding win for innovation and economic liberty, the 11th U.S. Circuit Court of Appeals unanimously ruled on Monday that taxi owners in Miami-Dade County have "no right to block competition" from ride-hailing firms like Lyft and Uber. By rejecting the notion that incumbent businesses are "entitled to…a competition-free marketplace," the 11th Circuit's decision should set an important precedent not just for the gig economy, but for reformers looking to crack open $400,000 on the secondary market….
But when Uber and Lyft entered the scene, they dramatically expanded the supply of available rides….
The rise of ride-hailing was facilitated by a drastic change in the regulatory environment. At first, county code enforcement officers conducted several undercover sting operations, ticketing drivers and even impounding their cars. But in 2016, Miami-Dade County approved an ordinance that legalized ride-hailing….
Facing greater competition, the value for a taxi medallion has since plunged by 90%, and now fetches $35,000 at auction. With a once lucrative business model now imploding, three taxi companies, Checker Cab, B&S Taxi and Miadeco, took the county to court and demanded a bailout. Echoing legal arguments that failed in Boston, Chicago, Georgia, and Philadelphia, the medallion owners argued that by legalizing Uber and Lyft, Miami-Dade County had "significantly devalued" their medallions….
In their view, deregulation was an unconstitutional "taking" that violated their Fifth Amendment rights…..
Writing for the majority, Judge Stanley Marcus meticulously dismissed their claim. Although the owners have an "intangible property interest" in their medallions, "the medallions conveyed only a property interest in providing taxicab services in Miami-Dade County—not in barring competitors," Judge Marcus explained. "Even the most cursory examination of the code reveals that the county did not give the medallion holders the right to enjoin competition," he added, while "the code furnished no basis for the medallion holders' assertion that they were entitled to, or could reasonably rely on a competition-free marketplace."
An earlier ruling on the same issue by Judge Richard Posner of the US Court of Appeals for the Seventh Circuit (which Judge Marcus cited in his opinion), provides a particularly good summary of why exposing businesses to competition does not qualify as a taking:
[T]he City [of Chicago] is not confiscating any taxi medallions; it is merely exposing the taxicab companies to new competition —competition from Uber and the other TNPs [Transportation Network Providers].
"Property" does not include a right to be free from competition. A license to operate a coffee shop doesn't authorize the licensee to enjoin a tea shop from opening. When property consists of a license to operate in a market in a particular way, it does not carry with it a right to be free from competition in that market… Indeed when new technologies, or new business methods, appear, a common result is the decline or even disappearance of the old. Were the old deemed to have a constitutional right to preclude the entry of the new into the markets of the old, economic progress might grind to a halt. Instead of taxis we might have horse and buggies; instead of the telephone, the telegraph; instead of computers, slide rules…..
Taxi medallions authorize the owners to own and operate taxis, not to exclude competing transportation services. The plaintiffs in this case cannot exclude competition from buses or trains or bicycles or liveries or chartered sightseeing vehicles or jitney buses or walking; indeed they cannot exclude competition from taxicab newcomers, for the City has reserved the right… to issue additional taxi medallions. Why then should the plaintiffs be allowed to exclude competition from Uber?
Judge Marcus and other judges who have ruled on such cases appropriately relied on the fact that city medallion laws did not include any guarantees against competition. As a legal matter, they only give holders the right to operate a taxi business themselves, not the right to suppress competitors. In my view, however, there would be no violation of the Takings Clause even if the medallion laws did include a legal right to block competition, which was then repealed by later legislation. I explained why in this post discussing an earlier taxi/takings case:
[E]ven if the laws conferring medallions did explicitly guarantee the holders protection against competition, that still would not be enough for courts to require compensation under the Takings Clause. The Clause does not require government to compensate businesses for any and all policies that reduce their profits. Compensation is only necessary if the government takes "private property." A state-created legal right to exclude competitors from a market is not private property. It goes beyond giving the holder control over his or her own property, and instead allows them to restrict the use of others' property (in this case, cars). Such a right is not private property as that concept is usually understood in Anglo-American law, and certainly would not have been considered such by the framers and ratifiers of the Fifth Amendment.
One could point to the example of intellectual property as a property right protected by the Takings Clause, despite the fact that it is in large part a legal right to constrain competition. But, as my George Mason University colleague Adam Mossoff argues in an important article, the Founders may have considered patent and copyright to be "natural" property rights, not merely government-created monopolies. If Mossoff is right, intellectual property is readily distinguishable from government-created cartels in conventional markets, including taxi medallion systems. If not, perhaps courts should rethink the status of intellectual property under the Takings Clause (though Congress would, of course, remain free to provide compensation to aggrieved intellectual property owners by statute).
In addition to rejecting the taxi companies' takings claim, Judge Marcus' opinion also ruled against their contention that deregulation of ride-sharing services violated the Equal Protection Clause of the Fourteenth Amendment because ride-sharing firms ended up less heavily regulated than traditional taxis. He does an excellent job of refuting this very weak argument. Similar arguments have also been rejected by other courts that have ruled on this issue.
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I bet their lawyer was unhappy when he found out Posner was on a panel deciding economic competition.
” relied on the fact that city medallion laws did not include any guarantees against competition. ”
I’m surprised at this… I thought the whole point of medallions (vs. mere licenses, open to anyone who met the statutory requirements) was that there would be a limited supply.
“A state-created legal right to exclude competitors from a market is not private property. ”
What about FCC licenses? Under your theory, can the government simply cancel them?
“…was that there would be a limited supply.”
Why would this matter? The government is still free to open up the supply. That doesn’t alter the takings’ analysis, since the government supply shrink isn’t an express promise to keep it shrunk forever.
“What about FCC licenses? Under your theory, can the government simply cancel them?”
What does that have to do with it? The government is not canceling the medallions. What you’re missing is that the medallion doesn’t give you the right to a limited supply. It gives you the right to be a supplier in a regulated market. That’s it.
Isn’t the advent of cable (and now internet) TV, exactly analogous to Uber and Lyft? Basically, they used new technology to make the old “guild” system irrelevant. The networks still have their licenses; those licenses are just a lot less valuable.
“What about FCC licenses? Under your theory, can the government simply cancel them?”
There is no canceling here at all being done. But Cable and now streaming services do exactly the same effect on the broadcasting market as Uber, Lyft , and others are doing in transportation.
CBS and all do not have a property right to prevent Cable and streaming from competing with them.
“What about FCC licenses? ” Would you think the holders of FCC licenses have the right to block video and audio competition from The Internet?
You can not provide a competition-free marketplace without preventing redefinition of the marketplace.
On one hand, I feel bad for taxi companies. The decline of the cab is undeniably correlated to the rise of uber and other app-driven transportation. I preferred cabs to uber, but cabs are going extinct and the supply is dwindling, making it increasingly inconvenient to rely on cab transportation. Medallions are/were expensive. They are/were required for airport pickups and downtown commercial transportation in some cities. Medallions protected the endangered industry. Maybe the utility of the taxi industry will return, maybe it won’t; but I expect the industry to be devoured by uber, thereby becoming a mere prop in remembrance of things past.
On the other hand, the opinion seems right and the outcome likely correct. Consequences be damned. Can’t wait to get my next uber ride from someone “new” to the area who nearly wrecks while staring at their GPS! On the plus side, I can give “Xi” a star!
“I preferred cabs to uber…”
Are you a psycho?
“Can’t wait to get my next uber ride from someone “new” to the area who nearly wrecks while staring at their GPS!”
Have you ever actually been in a taxi?
Lived in a college town for most of my adult life. Was acquainted with most cab drivers and didn’t have to monitor their route. When visiting elsewhere, I prefer Uber.
I have ridden in quite a few taxis and not so many Ubers.
I have had one bad experience with Uber. Generally, the vehicles have been scrupulously clean and the drivers efficient.
While most of my taxi experiences have been good, i have had a few that weren’t. And the taxis generally we’re older and dirtier.
I think competition is a good thing (for the consumer).
I much prefer Uber/Lyft to taxis, and would still prefer them if they weren’t cheaper.
The medallion system is ridiculous. I don’t know if that’s the reason taxis stayed behind the times, but it’s an excellent candidate.
The simple convenience of being able to summon a car on my iPhone, track its progress, and then have the fare charged to my credit card, rather than having to fumble with cash, often at night, is great. (Incidentally, some drivers who formerly drove cabs have told me that not having to carry big wads of cash makes driving for Uber much safer, hence more attractive, than driving a cab.) So is the GPS. I live on a small side street. If I take a cab home I almost always have to provide directions, warn about upcoming turns, and so on. That’s not the case with the apps.
I don’t care which one I use. I’m not waiting 30 minutes on a cab when I can get an uber in 2 without having to call the taxi company.
I’ve declined to use Uber, Lyft etc., so far as a matter of principle (if I have the energy I may try to explain why in a further comment later today), though that might change if/as these folks drive cabs out of business. (I am not, as far as I know, “psycho,” to answer NToJ’s question, though I do overuse parentheses when I don’t take the time to write well.) So I’m not qualified to comment on how wonderful or not Uber’s service is. But I wonder how often, how recently, some of the folks criticizing cabs have ridden in one. I’ve had uniformly great service, albeit at prices that I bet exceed Uber’s, in my home county and generally good service elsewhere. I can’t recall the last time I rode in a cab that only accepted cash. When I call for a cab (I could use the app, but I’m old-fashioned), I can track it on my phone. The only problem I’ve had with timeliness is that if I call it from my apartment, the cab will often get to the lobby before I do. I think the cab companies have also heard of and, if necessary, will use GPS, but drivers I’ve used generally know where they’re going without it.
===I’ve declined to use Uber, Lyft etc., so far as a matter of principle===
One excruciatingly cold night this winter, when I, like many others, could not get my car started, the taxi company phone guy said there were 10 ahead of me…before he could even schedule me.
The AAA guy, who couldn’t get my car started, said install Uber.
6 minutes later I had it installed and my info entered. 6 minutes after that, I was picked up at my doorstep.
Taxi companies and their sophistry-meister monopoly protectors in government can go hang.
Not only has Uber killed traditional taxi service, it’s killed any need to rent a car while mine is in the shop.
“That’s $60 per day plus another $60 per day for insurance since you only have a debit card.”
That’s 4 decent-sized round trips with Uber, and I only need one on workdays.
So I’m in the unfortunate situation of having to answer to insurance companies every once in a while, and many of them will pay for taxi travel but not Uber. So I get to ride both, often. The quality of the service, the state of the vehicles, etc. has not changed since pre-Uber, in my experience. In no region have I seen a marked improvement in taxi service as a result of Uber or Lyft. Literally the last cab I was in had a credit card machine, but the driver told me it was broken, so I had to pay cash. Fortunately I’ve only had to pick up cabs at airports or scheduled pickups at my hotel, so I don’t know about pickup. But the last time I spoke with a dispatcher (which was post-Uber, since Uber had fled my city), it was a wildly unpleasant experience and I had to call back twice to confirm the location for pickup.
Also this idea that a regulated industry is some panacea to all social problems is just wrong. The last time a car struck me, it was a taxi cab, and the company was self-insured. My insurer took the position that that meant basically uninsured, and I could wait (forever) to get my deductible back because they had no expectation of receiving any money from the taxi’s insurer. (They did get the money back, but it took 8 months.) The last time I was in a car accident with another driver insured by a major insurer, I got my money back 2 weeks after repairs.
Our local taxes, protected by government, used to have Bible verse decals. Companies can do whatever they want with their own property, but it’s squicky when they run a mandated/authorized monopoly. They also sucked.
Now that we have ride sharing, it seems that it wasn’t actually sound to have those decals or to suck. Thank God for competition.
According to the leftist point of view, it makes a lot of sense. Your so-called “rights” are merely privileges — property, even — granted to you by the State at the pleasure of the State.
Yeah, you seem an objective judge of what ‘leftists’ think.
What I lack in objectivity, I make up for with incisive accuracy. 🙂
M.L. where do you think the constitutional amendments (which list/address our rights) came from?
The original bill of rights listed the rights we inherently possess. They weren’t granted or given to us by the USC.
They may not have been granted by the BoR, but it’s the BoR that constrains the US Government from violating them.
Perhaps the colonists inherently had the right not to quarter troops before the 3A was passed, but it seems that this inherent right did little to prevent the British from actually doing so.
Even if your right is suppressed, you still possess it. The history of humanity is suppression. You have to fight for what is inalienable.
Pete is right. Along with the truths we hold to be self evident, there is a corollary: the entire history of unalienable rights is one that ranges from constant infringement to total deprivation, suggesting that human nature is flawed and even the best possible actualization of such truths by human efforts may always be extremely imperfect.
Don’t forget the inalienable right we celebrate in The Declaration of Independence; namely the right to overthrow government by violence. What happened to that one? (Rhetorical question because what happened is that we took away that inalienable right in The Constitution.)
We have an “inherent” right to a trial by jury in a common law Suit where the value in controversy exceeds twenty dollars?
Where did we “inherent” that from?
You have a right to be tried by your equals.
I agree there is no taking. I also agree the difference between the taxis and the app-driven vehicles passes the (quite low) rational basis bar.
That said, I think that as a policy matter the taxi people have something of a point. It seems to me that the fact that an app rather than a street hale is used isn’t really such a fundamental difference, and doesn’t really fundamentally alter the state’s interest in such things as the safety inspections of the vehicles, background checks and knowledge of the drivers, insurance requirements, whether rates are capped by law or not, and much else.
It seems to me that Uber and Lyft’s business model is “fundamentally different” from the taxis only because the law forces this to be so. If the law had similar rules for insurance, drivers, inspections, rates, etc., the business models would be much more similar.
I agree the matter is not for the courts. But I do think the taxi companies’ argument that the difference in regulatory regimes is unfair, and the regulatory requirements for the two should become more similar and should differ only where there is an actual difference in state interests, has a point.
By way of analogy, consider the difference between a restaurant that takes in only walk-in orders, and a restaurant possessing a telephone enabling customers to order in advance.
However marvelous and revolutionary a device people may think the telephone to be, I find myself skeptical that a telephone-equipped restaurant represents such a fundamentally different business model from a foot-traffic based restaurant as require completely different sanitation codes, inspection requirements, personnel requirements, pricing rules, etc. etc. etc.
The internet has been around for a quarter century. After a certain amount of time, the idea that businesses that communicate with their customers by internet are so fundamentally different creatures from businesses that communicate with them in other ways that EVERYTHING about them is different, is starting to seem as quaint a form of boosterism as my analogy regarding equipping a restaurant with a telephone.
“. . . the state’s interest in such things as the safety inspections of the vehicles, background checks and knowledge of the drivers, insurance requirements. . . .”
Those things are requirements for all drivers and vehicles already.
A better comparison might be a professional bakery vs a seller who uses their home kitchen, and on an individual basis, sells nowhere near as many goods as the professional bakery.
(The food argument is tricky, given the various food laws and regulations around the country, but let’s assume a state where home kitchens are not regulated if they sell below x amount of confectionary treats).
If an app came about making it significantly eaiser for me to order from the home-baker, it should not matter that more home-bakers join the market to sell goods. They are still home bakers, even if they use the app to sell their goods. As such, differences in regulations have precedence and are justifiable.
In many States, bakers cannot sell goods not produced in a commercial kitchen, period.
Fun things you learn working a farmer’s market.
Yes, though I think there is a case for stricter safety requirements, or perhaps more frequent inspections, for Uber cars than for ordinary private passenger cars, just on the grounds that they generally travel more miles – more wear – and that paying passengers are involved. That also suggests higher liability insurance requirements.
I think it’s the opposite. When you have a regulated system the public just learns to live with a certain (low) level of quality and never has an opportunity to make meaningful decisions about improving the quality. When you remove the consumer decision to the legislative level, nothing ever happens because the quality of taxis (or their safe use) isn’t a big enough issue on most people’s radars. Uber and Lyft show up and they aren’t governed by the same stringent (
HTML screw up. Anyway, I’m not sure “higher liability insurance requirements” are necessary. When I ride share, I’m taking the same risk I would in getting in any other person’s car. There are already minimum liability insurance for drivers, so it isn’t clear why we’d need more for Uber and Lyft. And in any event, I’d trust Uber and Lyft more to know what those limits are, than I would (for e.g.) the Austin City Council.
It’s like when Austin and Uber/Lyft got in a fight over finger prints, Uber/Lyft were replaced by non-profits in Austin who did 100% fingerprints, and then a Ride Share (fingerprinted!) driver rapes one of its passengers. The regulations are a false sense of security that interferes with the better feedback mechanism for safety, which is word of mouth, customer enjoyment, and swift internal consequences from the company. The financial incentive Uber/Lyft have to prevent rapes of passengers is going to be more effective than any passive regulation by cities.
When you have a regulated system the public just learns to live with a certain (low) level of quality and never has an opportunity to make meaningful decisions about improving the quality.
I disagree. You are claiming that removing regulations would make the companies better and more careful. That seems wrong. Besides, market feedback doesn’t disappear. If I get consistently poor rides from Uber I’m going to stop using them, and tell people, regulations or not.
There are already minimum liability insurance for drivers, so it isn’t clear why we’d need more for Uber and Lyft…. I’d trust Uber and Lyft more to know what those limits are, than I would (for e.g.) the Austin City Council.
Maybe because the expected liability is greater. Whatever Uber and Lyft know, their incentive is to hold down costs. If a driver causes an accident who is liable? If the company, they can pay, I guess, if they will. If the driver, that’s a problem.
The regulations are a false sense of security that interferes with the better feedback mechanism for safety, which is word of mouth, customer enjoyment, and swift internal consequences from the company. The financial incentive Uber/Lyft have to prevent rapes of passengers is going to be more effective than any passive regulation by cities.
There is still feedback. And what is the feedback mechanism for safety? I can’t tell how safe a car is when I get in, can you?
“…removing regulations would make the companies better and more careful.”
I’m claiming that, historically, imposing those regulations on cab companies didn’t make cab companies feel any safer, and when they faced real competition by unregulated entities, the unregulated entities mowed them over (including in terms of safety).
“Besides, market feedback doesn’t disappear.”
But it did, with cabs, because it was a regulated industry. Once you have the medallion, you just need to meet the minimum requirements. The cab companies don’t have real incentives to compete on quality of service because they’re already set up. And the owners of the medallions aren’t acting like small business owners, they’re just investors in the ride-hailing equivalent of tenement housing. Why do you think Uber and Lyft came out with the aps (and ratings of drivers) before a single cab company in the United States?
“If I get consistently poor rides from Uber I’m going to stop using them…”
Right, in fact if you get a poor ride from Uber, you can immediately rate the driver. Getting below 4.8 is basically disqualifying for Uber drivers. But if you have a bad cab ride? You call a dispatcher and complain, and the dispatcher curses at you and hangs up. The cab driver has to literally stab you to get fired. Just because you say he was unfriendly towards you, so what? He passed the fingerprint background check. Of what moment is it to the cab company that you don’t like him? He already has another fare that he picked up at the airport, because people at the airport don’t get to pick their driver. (Which is one reason it’s regulated in the first place.)
“If the driver, that’s a problem.”
For whom? If it is a problem for consumers, they shouldn’t use Uber of Lyft. Why would the Austin City Council know better than me the amount of insurance I’m willing to take my chances with in an Uber? (I’ve already secured other insurance to protect me, including medical insurance.) If the purpose is to protect innocent third-parties from Uber or Lyft drivers, that’s what mandatory 30/60/25 insurance is for. If that needs to go higher, great, but it shouldn’t be imposed exclusively on Uber and Lyft. Because doing so simply shifts the costs from drivers generally to Uber and Lyft’s passengers. That’s not fair or justifiable.
“I can’t tell how safe a car is when I get in, can you?”
In a regulated industry (like taxis) the feedback mechanism is some horrible rape occurs, the victim lobbies their state rep to increase the background check rules for taxi drivers, the taxi lobby successfully prevents the regulation, and the industry proceeds with its minimum requirements. When the public complains, the taxi companies defend themselves because they’re regulated industries. When the victim sues, the taxi company defends itself on the basis that it met the regulatory requirements and was not, for that reason, negligent. The people who created the pointless regulation (say, Austin City Council) aren’t liable to you in any event because of sovereign immunity.
For ride-sharing companies, the feedback loop is they go out of business when someone gets raped. They get sued. They can’t defend on the basis of minimum regulations, but instead have to face a jury for negligent background checks. The result is that Uber and Lyft have far more stringent background checks than any cab company in the country, even though they don’t do the idiotic fingerprinting check insisted on by cities for no reason other than that was their best idea on how to check cab drivers. It’s a regulation that has less relation to actual incidents of violent crime by drivers than the checks that Uber and Lyft do, for the reason that the latter are far more likely to be worried about liability than taxi companies.
It seems to me that the fact that an app rather than a street hale is used isn’t really such a fundamental difference, and doesn’t really fundamentally alter the state’s interest in such things as the safety inspections of the vehicles, background checks and knowledge of the drivers, insurance requirements, whether rates are capped by law or not, and much else.
I agree with all this except the rates being capped.
The reason taxi fares should be set is that it is, or was, difficult or impossible to know how much a ride was going to cost, or to compare prices. This was especially so at places like airports, where there is a taxi stand and you take the next cab in line. With the apps that’s not so. You get the price before you order the car.
OTOH, safety inspections, background checks, insurance requirements, and so on are sensible regulation.
The real sticking point is the imposition of an arbitrary cap on the number of taxis by insisting that even if you have met the safety, background and insurance requirement, you may not be permitted to operate.
I agree.
Part of this, at least in NYC, is an effort to prevent the streets from being filled with Uber cars, which results from economic issues around use of streets, parking costs, and so on.
There is a point at which this becomes a “tragedy of the commons” situation.
“I agree with all this except the rates being capped.”
“safety inspections, background checks, insurance requirements, and so on are sensible regulation.”
Regulations I like are sensible, those you like are bad.
Setting [or capping] uber fares is just as sensible [or not] as the others.
If you can’t see the difference you’re an idiot. But we knew that.
An admission that I am correct, thank you.
What admission, Bob? What are you even claiming to be “correct” about?
There is a big difference between regulations intended to protect passengers’ safety and regulation of fares.
I wouldn’t go around bragging that I didn’t understand that if I were you.
No, liberals’ proposals STATED goal is to protect safety. Their REAL goal is to add burden and expense.
“No, liberals’ proposals STATED goal is to protect safety. Their REAL goal is to add burden and expense.”
Yes, NYC and other places use safety and congestion as excuses to exercise control.
Neither inspections nor background checks will have no actual affect anyways, they are just theater.
I was also referring to gun policy. Their desire to control isn’t limited to Uber.
“There is a big difference between regulations intended to protect passengers’ safety and regulation of fares.”
They are both just as “sensible” which was your point
Argument: Regulation of fairs protects the public from price goughing and let’s the poor have better access.
I don’t agrees with it but normally you would buy it. You don’t here because you enjoy the current fares.
I don’t agrees with it but normally you would buy it. You don’t here because you enjoy the current fares.
You have no idea what I think about it.
I specifically said that I didn’t think the fares should be regulated, and you pull some bullshit reason out of your ass as to why that’s not my usual opinion.
A price regulation (virtually always a bad idea) is intended to centrally plan the market. A safety regulation (sometimes a bad idea, sometimes not) is intended to set the minimum by which the market must operate. The reason is that central planning cannot effectively set the best price, but central planning can set minimum standards on which 51% of us agree is socially useful.
The cab drivers seem to have been trying the same thing that the proprietors of the Charles River Bridge were in Charles River Bridge v. Warren Bridge, 36 U.S. 420 (1837), but relying on the Takings Clause (which back in 1837 couldn’t be invoked against a state) rather than the Contracts Clause. In both cases, the losers claimed there was an implicit deal, in reliance on which they had spent big bucks buying what they thought was a license to rake in supra-competitive profits.
Went to a concert in D.C. a couple of weeks ago with say 30,000 other folks. It ended after the nearest Metro station closed at 11:40pm, and there were zero taxis around. Uber and Lyft were the only options, and the streets around the venue were swarming with their cars picking people up. When public transportation and conventional cabs won’t be available for folks, they’ll vote with their dollars for better customer service.