Would Uber and Lyft Really Pull Out of Chicago?

Update (6/20/16): Looks like Uber and Lyft may be safe for now.  Ald. Beale has agreed to ‘study’ the fingerprinting issue for 6 months and will not require rideshare services to fingerprint their drivers – for now.

This Wednesday, the Chicago City Council will vote on an ordinance that could force Uber and Lyft to pull out of the city indefinitely.  If this story sounds familiar, it should.  Over the past year, Uber and Lyft have waged regulatory battles in several high profile locales (New York, Broward County, etc), and neither company is currently operating in Austin due to a recent fingerprinting requirement imposed by the city council.

We actually traveled to Austin a couple weeks ago to see the situation first-hand, and now it looks like Chicago might be next.  Many municipalities have tried to impose stricter taxi-like regulations over the past year, and it’s been a huge sticking point for the TNCs.  In fact, anything that involves fingerprinting of drivers or impediments to on-boarding is likely to elicit pull-out threats from Uber and Lyft since these companies rely on being able to churn and burn through their workforce.  By Uber’s own admission, they lose half of all drivers after just 12 months and, when you factor in their growth, they need to hire at least 60,000 new drivers every single month (according to my calculations) just to run efficiently.

We've heard this before - would Uber and Lyft really leave Chicago? We cover the regulations in Chicago here.

Chicago by Market Cap

I’ve never been to Chicago, but it is the third largest city in the US with close to 3 million people and 90,000 rideshare drivers.  When Uber and Lyft pulled out of Austin, it was a big deal because that was the biggest market they’ve ever left.  Chicago is three times bigger though, and it’s one of the largest markets for Uber and Lyft in the country.  So if Uber and Lyft were to leave, it would be a HUGE deal.

What’s Happened So Far?

Last Friday, the proposed new rideshare legislation went before the transportation committee and passed unanimously.  This doesn’t mean a whole lot though since getting out of committee is the easy part.  These meetings are lightly attended and are really more of a first step than anything.  I testified on behalf of AB1727 in Sacramento a few months ago, and although the bill made it out of committee, it was ultimately killed before even going up for a vote.

The Chicago bill’s sponsor Ald. Anthony Beale has stated that he remains open to negotiations, but the the official Council vote is this Wednesday.  The bill would need the support of 26 of Chicago’s 50 aldermen to pass.  Like we saw in Austin, the bill won’t force Uber and Lyft to leave, but the two TNCs have threatened they would pull out if the bill passes as is.  The bill would go into effect 120 days after it’s voted into law.

What Does the City of Chicago Want?

To put it bluntly, Chicago is trying to regulate rideshare to be more like taxis.  TNCs definitely have an unfair advantage when it comes to regulations, but I don’t think the answer is regulating them more.  It’s pretty simple logic, actually, if you have one product the public loves, rideshare, and another product people hate, taxis.  Why would you want to regulate the one that people love to make it more like the one people hate?  That just doesn’t make sense.

Instead, the city council should be de-regulating taxis to make them more like rideshare.  That seems like it would be in the public’s best interest, but clearly there are some ulterior motives at play.  It’s probably not a surprise that PACs representing taxis have contributed $51,500 to 13 different aldermen.

Either way, here’s what the city council is proposing (full text of the ordinance here):

  • Fingerprinting: No surprise here, this is probably the biggest requirement of the new ordinance.
  • Training Program: This would be a one day training class that all drivers would have to take.
  • Restricted Chauffeur’s License: This would be different than a taxi chauffeur license but would cost drivers $115.
  • Settle outstanding debts: Chicago Uber and Lyft drivers currently owe the city over $15 million in outstanding fines and tickets.  So basically drivers would need to pay their parking tickets in order to get their license, which I think is a reasonable request.
  • Wheelchair Accessible Fleet: The ordinance would also require 5% of vehicles to be wheelchair-accessible.
  • No ride-hail vehicles more than 6 years old: This is one aspect of the ordinance that makes no sense to me.

Even though I’ve stated my case against taxi-like regulations, I’ve also seen what can happen to drivers (lower rates, no say in working conditions, etc) when Uber and Lyft are given free reign to regulate themselves.  Too much regulation is a bad thing but not enough regulation is even worse, especially for drivers.

Is Fingerprinting Safer?

I’m not convinced that fingerprinting drivers is actually safer since you have experts on both sides of the table saying different things.  The latest big name against fingerprinting is Eric Holder, who works for a law firm that represents Uber.  This week he wrote a letter that also echoed Uber’s latest argument that fingerprint-based background checks could be discriminatory.  Here’s an excerpt of that letter:

With nearly 50 percent of African-American men and 44 percent of Latino men arrested by age 23 nationwide, the practice of denying work based on law enforcement records with incomplete and inaccurate information disproportionately disadvantages people who have been arrested. The impact becomes even more acute when looking at communities such as Chicago, where 80 percent of working age African-American men have criminal records and nearly half of young black men are unemployed.

This argument may be true but one thing that has become acutely apparent in my dealings with Uber is that, more than any other TNC, they look at their drivers like just another number on a spreadsheet.  They don’t care much about retaining good drivers and will only do so when it makes good business sense.  Why else would it take years to add driver friendly features like a destination filter, waiting time pay and more?

Most drivers will tell you that Uber is a passenger-centric company and that’s evident in many of their policies.  I get countless e-mails from drivers who get deactivated by Uber because of some wild story their drunk passenger made up about them.  Drivers never get the benefit of the doubt with Uber when it comes to ‘he said, she said’ situations.  But when we were in Austin meeting with all of the new start-ups looking to replace Uber and Lyft, I genuinely felt like some of the executives we met with cared about drivers and wanted to see them get work.  Contrast that with Uber and Lyft’s strategy of leaving one day after they lost the vote and putting tens of thousands of drivers out of work, and you can see exactly what I mean.

Uber has now used this argument that background checks are racist and tipping is racist but when it comes to the ratings system that determines whether or not drivers get to stay active on the platform, all of a sudden they don’t have anything to say about that.  Drivers are de-activated for falling below 4.6 rating and often have no idea what they did wrong.  So while fingerprint-based background checks may disproportionately affect minorities, I don’t buy Uber’s argument that that’s why they don’t want them.

What About All The Other Requirements?

It may surprise some people, but I actually think that some type of training would be a good thing for new drivers.  I might be a little biased since I run my own video training course for rideshare drivers, but one of the reasons why I created that course is because being a rideshare driver isn’t as easy as it seems.  It’s a combination of skills, since you need to be good at customer service, multi-tasking and you need to safely navigate and drive.  Uber and Lyft don’t provide anything in the way of training and it’s one of the biggest complaints I hear from new drivers.  They have a lot of questions and feel like they’re thrown to the wolves when they’re first starting out.

As for the restricted chauffeur’s license, I’m always hesitant with government licenses since these processes tend to be so archaic.  At least with fingerprinting or training, there is a legitimate argument over safety, but I just don’t see the value added in a license other than giving the city more money.  Seems like just another tax on drivers similar to the business license fiasco in SF.

A wheelchair accessible fleet makes sense to me and Uber is already working on this in many places so I don’t think they’d have a big problem with this.  If anything, I think Uber has done a lot more for people with disabilities than taxis ever have.

The 6 year limit on vehicle age is one of those head-scratchers since as long as the car is running and safe, who cares how old it is?  The city should have some say in the operational standards of the vehicle but it should be purely up to Uber and Lyft to set the age of vehicles on their platform.  This requirement would also be a deal-breaker for a lot of existing drivers (myself included) since they’d no longer have an eligible vehicle and it could potentially put thousands of drivers out of work.

Would Uber and Lyft Really Pull Out of Chicago?

I was surprised when Uber and Lyft pulled out of Austin but I would be shocked if they pulled out of Chicago.  If you believe Uber’s claims that they are profitable in many of their top cities, pulling out of Chicago would cost them more than just principle, it would also cost them a LOT of revenue.  That’s revenue they need in order to fund subsidies in places like China where they’re currently losing $1 billion a year.

Leaving Austin really backfired for the TNCs since now there’s a ton of competition looking to take over their market share and regulators are not feeling much pressure from their constituents.  If Uber and Lyft pulled out of Chicago, it could be a huge opportunity for well-funded startups like Juno out of NYC or Fasten in Boston/Austin to expand their territory.

The bigger theme though with Chicago is that it’s sort of a turning point for Uber and Lyft because their strategy of pulling out has worked well in the past, but they can’t just keep pulling out of markets where they don’t like the regulations.  Eventually, they’re going to have to compromise or there will be no markets left to pull out of.

Even places like New Jersey and Uber and Lyft’s home state of California are looking at increased regulations.  So I think the pulling-out strategy works well once or twice, but regulators are starting to call their bluff.  And if these Chicago aldermen call up anyone on the City Council in Austin, they’re probably going to feel even more confident about imposing these regulations.

What Should Chicago Drivers Do?

Put simply, Chicago rideshare drivers need to prepare for the worst.  A lot of drivers got screwed over when Uber and Lyft pulled out of Austin, but we met a handful who were well prepared.  They signed up for the existing rideshare companies (Get Me and Wingz) early on and took full advantage of high demand and low supply once Uber and Lyft left.

If Uber and Lyft do leave, there’s going to be a glut of drivers signing up for ancillary services and many of the smaller companies won’t be able to quickly process thousands of applications.  So if you depend on rideshare income, you may want to start exploring back-up plans ahead of time.

There are a few options for getting around in Chicago but they may not be applicable to TNC drivers since they require livery plates and/or commercial insurance.

  • Arro and Curb are two taxi-hailing apps that operate in Chicago.
  • DivvyRide is a company that looks like a rideshare app but they actually require livery plates.

It might still be worthwhile to reach out to these companies though because if Uber and Lyft were to leave Chicago, I suspect a lot of them would launch some type of service to fill that gap.  The opportunity is just too big to sit on the sidelines.

Via is the only one that appears to be accepting current rideshare drivers.  They have more stringent vehicle requirements but probably still a good idea to apply anyway and see what they say.

I think delivery might be the safest back-up plan though.  Postmates and Doordash are the two biggest ones but when Uber left Austin, their UberEATS service stayed active so that’s another option.  And there are also delivery gigs for companies like Amazon through one of their sub-contractors.  These jobs are a little tougher to find but they are definitely out there.  You can imagine there will be lots of competition for applicants if Uber and Lyft leave.

The last option for current rideshare drivers is to start building up their private networks of clients.  When Uber and Lyft left Austin, 30,000 people joined a Facebook group called Arcade City and it was basically the Wild Wild West when it came to getting/giving rides.  All of these rides technically have no insurance and put drivers/passengers at a lot of risk, but in the absence of Uber and Lyft, demand will still be there and drivers still need to make money, so let’s not pretend that this isn’t happening.

If you feel strongly that you’d like rideshare to stay as-is in Chicago, you can also contact your local Aldermen.  I’d also hit them up on Twitter if you can find them, and Uber has launched an official petition that has already garnered over 100,000 e-signatures.

What’s Going to Happen in Chicago?

I think the stakes are too high in Chicago for Uber and Lyft to pack up and leave but there’s still pressure on both sides to work out a deal and keep rideshare in Chicago.  Ald. Beale has already talked about the potential for compromise, but if fingerprinting is on the table, it will be a sticking point for the TNCs.

Uber and Lyft are staunchly anti-fingerprinting but they appear to be the only ones.  To the average consumer, fingerprinting makes a lot of sense and seems like a good way to keep the service safe.  So it’s hard for the general public to side with TNCs when they leave a market over such a seemingly small requirement.  And in fact, a lot of drivers I’ve talked to are actually for fingerprinting because in addition to the potential safety enhancements, it would also limit the prospective pool of drivers.  So ironically, these regulations could force Uber to actually care about driver retention and I think that’s one thing, as drivers, we would all like to see.

What do you think about the proposed rideshare regulations in Chicago?  Do you think Uber and Lyft should get to play by their own rules or should they be forced to compromise?

-Harry @ RSG