Ammori on local taxicab competition, antitrust, and other solutions

My friend Marvin Ammori has a piece in Slate about Uber, Lyft, and SideCar, three new companies trying to provide competition to the taxicab market. Here’s what he has to say about the antitrust solution to taxicab monopolies:

It might seem odd to call for a federal agency like the FTC to take action in what appears to be a purely local issue. But not only does the FTC have the authority to take these cities to impartial federal courts and end their anticompetitive actions; it also has deep expertise in taxi markets and antitrust doctrines. By law, the FTC’s power to regulate “interstate commerce” is just as broad as Congress’, and that power is famously far-reaching, even covering the growing of plants at home for purely personal use. Here, as the agency noted in its 1984 cases against Minneapolis and New Orleans, the FTC could regulate local taxi markets merely because interstate travelers take taxis (and Ubers) to and from the airport when they fly across state lines. Moreover, Uber, SideCar, and Lyft are California-based technology companies competing in multiple states.

The FTC’s general antitrust authority, however, only sometimes outranks city authority. Under the Constitution, federal law trumps both state and city law. But antitrust law allows states some exceptional leeway to adopt anticompetitive business regulations, out of respect for states’ rights to regulate business. This federal respect for states’ rights does not extend to cities—they are subject to the antitrust laws unless states pass legislation absolving them. For example, Minneapolis ended up avoiding the 1984 lawsuit by acceding to the FTC and permitting more competition. New Orleans did something different: It succeeded in lobbying the state of Louisiana to authorize its anticompetitive actions, to the detriment of consumers.

Some states, including Florida, Nevada, and Texas, could argue that like Louisiana, their laws currently authorize the city governments to undermine competition in their taxi markets. Nonetheless, the FTC should test the law in these states with litigation, as the Supreme Court’s position is unsettled. Under the few Supreme Court decisions spanning the past several decades, cities can engage in anticompetitive acts only when the state legislature “clearly articulated” and “affirmatively expressed” a state policy to displace competition and replace it with an uncompetitive market. To complicate matters, the court “disfavors” interpretations of state law that permit anticompetitive city regulation, yet it still permits city anticompetitive action even it is merely a “foreseeable result” of the state law. Put all this together and the FTC can likely argue that state taxi authorizations do not foresee anticompetitive restrictions on apps like Uber and services that permit average citizens to tip one another for a ride. At the very least, Washington, D.C., is not in a state, so no state law can protect it from the FTC’s antitrust powers.

Since the FTC/antitrust solution may not work, Marvin suggests action by state governments or Congress, which he argues “should be politically feasible.”

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