In Michigan, Uber Operates in a Legal Gray Area — These Bills Would Change That

Ridesharing companies have been operating in Michigan for a couple of years now, but they do so in a legal gray area. Because drivers don’t fall under the legal definition of taxi or chauffeur, in some cities they have been ticketed and fined.

The Legislature is considering a few different approaches to regulating ridesharing. A package of bills that passed the House last summer would provide a light statewide regulatory structure for transportation network (or ridesharing) companies, setting standards for insurance, background checks and disclosure of information for consumers.

Competing bills in the Senate do many of the same things, but add further, more onerous restrictions on drivers and companies. They would require chauffeur’s licenses for all drivers and allow individual cities and airports to create their own restrictions and regulations, and even ban such companies completely.

The Mackinac Center recently hosted an Issues and Ideas Forum in Lansing to discuss the difficulties in regulating transportation and discuss how to get it right for ridesharing. Michael Farren, who studies regulatory policy at the Mercatus Center, began the discussion with an explanation of how transportation regulations have developed over time.

Each new form of transportation initially faces opposition from the entrenched services, Farren said, citing a 19th century bill once considered in Pennsylvania that would have required all automobile drivers to turn off, dismantle and hide their motorized vehicle in the presence of livestock. When streetcars faced competition from a precursor to taxis, cities used regulation to protect the streetcar market. Today, the taxi industry has made similar efforts to drive away competition from ridesharing companies.

Farren said many states are allowing cities to essentially ban companies like Uber and Lyft and facing a backlash from consumers. Others are going in the other direction.

"There are some cities that have actually fully-deregulated the transportation industries," Farren said.

He called for low barriers to entry and a structure that sets safety standards, but does not try to micromanage or ban new services.

"If you have high barriers to entry, you have this level of protection that...grants this monopoly privilege, or protectionism, to established companies," Farren said. "You get lower service and higher prices as a result."

The second panelist was Tim VanDongen, a ridesharing driver who has driven for both Uber and Lyft, and has used the platforms they created to launch his own company, which advertises in ridesharing vehicles. He shared his personal experiences as a driver active in many different communities around Michigan, and how ridesharing has created opportunities for full- and part-time employment for drivers while creating safe, affordable and easy transportation for everyone from college students to retirees. Passengers use Uber and Lyft to get to the airport, to medical appointments, even to work.

"Uber just makes you feel like an entrepreneur out there," VanDongen said. "You can log off and go do something, or stay logged on and [work] as much as you want. You don't really have a boss."

VanDongen identified some of the advantages to a statewide ridesharing framework: It would allow drivers to get started quickly and work in any city supported by their app. It would also allow ridesharing companies to easily expand into smaller population centers that have a demand for those services. Uber currently operates in six Michigan cities; Lyft operates in two.

When asked about the competing bills up for consideration, VanDongen said he believes the House package is better for drivers and consumers.

"I think the House bills [are better]," VanDongen said. "It provides a blanket regulatory structure for transportation networks. ...Currently there is nothing, so drivers are getting pulled over. I think the [Senate bills] regulate too much and treats [us] like a taxi." He added that he sees problems with different cities setting different rules, or even banning companies, since Uber and Lyft drivers travel across different towns.

The panelists noted other benefits to ridesharing, like the fact that it takes cars off the roads, helps low-income people afford transportation, and ensure inebriated people get home safely. Some studies have demonstrated a correlation between access to ridesharing and a decrease in drunken driving.

House Bills 4637-4641, which establish a light regulatory structure, have passed the full House and are sitting in the Senate Regulatory Reform Committee. The Senate Bills, 184 and 188, which establish higher regulations and allow local governments to restrict Uber and Lyft, have passed the committee but have not been taken up in the full Senate. To learn more, see www.mackinac.org/ridesharing.

Here is a video replay of the event: