Everything You Need To Know About The Lyft Controversy

Everything You Need To Know About The Lyft Controversy
Image: Frequent Flyer University

You’ve probably heard a lot about Lyft, the new ride-share service that’s been preparing to come to Brooklyn and Queens for quite some time. It was due to debut on July 11, featuring pink mustachioed cars that would convey residents of the outer boroughs from point A to point B, but in the days leading up to its launch the Taxi & Limousine Commission was threatening to block the service at every turn and it seems like the organization has finally succeeded (with a little help from some friends Upstate). Here, a rundown of the whole Lyft situation and why it matters.

What is Lyft and how does it work?
Lyft is a San Francisco-based ride-sharing app operating in 64 cities across the country that connects those without cars with people who have them. Think of it as hitchhiking minus the scary, dead-in-a-ditch part. Users request a pickup, get matched with a “friendly, background-checked” driver in their own pink mustachioed car and then get dropped off where they need to be. Pretty normal except Lyft has a weird payment system: At the end of the ride, passengers are encouraged to “donate” their fare and Lyft gets 20 percent of whatever’s paid. You could choose not to pay, but then your driver may give you a bad passenger rating on the app. Passengers can also rate drivers.

Cool. So, how is Lyft different from the ever-present Uber?
Well, Uber works by connecting those in need of a ride with taxi and black cab drivers operating within the Taxi & Limousine Commission system. These are people that have already gone through the commission’s background check process.

So, what’s the problem?
Lyft wants to operate outside that system and create their own network of drivers with their own network of cars without any involvement from the TLC. By technically not employing their drivers, Lyft hoped to avoid the TLC restrictions, but the TLC wasn’t having it. So, today the TLC threatened to interfere with Lyft on the premise that the ride-share app is an “unauthorized service.” The TLC stated that it would straight up seize Lyft vehicles (which belong to their drivers), Lyft drivers would face heavy, $2000 fines and TLC-approved drivers found using Lyft would be swiftly punished.

How did Lyft respond?
They issued a very long statement about their thorough background checking system and their strict rules regarding what their drivers can and can’t do. Just to name a few: Drivers, who must be 21+, aren’t allowed to pick up street hails and their cars (no older than 14 years old) must pass “a 19-point safety inspection” conducted by Lyft or an approved third party. Read the whole Lyft statement here.

Sounds good. So, why are they still in trouble?
Because that wasn’t good enough for the TLC. They’d rather be involved in the whole process than unleash a fleet of cars they know nothing about onto the outer boroughs. And on July 10, the TLC got the backup it needed when the Department of Finances issued a cease-and-desist order to Lyft. In the notice, which you can read in full here, Superintendent of Financial Services Benjamin M. Lawsky states that the company is “engaging in insurance and livery activities in New York in violation of the State’s Insurance and Financial Services Law, placing the public at risk” and that the service “inappropriately shift[s] the insurance costs of a commercial enterprise to private citizens and their insurers.” What’s more, it seems that Lyft lied to the Department of Finances, claiming in a June 5  meeting that they had absolutely no plans to launch in New York City—and then attempting to launch a month later. Not a good look at all.

Update: As of 1:17 pm on July 11, the State has filed a restraining order against Lyft. According to Attorney General Eric Schneiderman, scourge of airBNB, Lyft is trying to operate “without proper licensing.”

What happens now?
Lawsky et al. are demanding that Lyft cease all operations in New York state (including their services in Buffalo and Rochester) until they comply with state law. Lyft has not publicly replied to the order yet and is scheduled to begin operation at 7 pm on July 11.

And why does it matter?
The TLC has long had a reputation for policing street transportation in this city. The most famous example is the dollar van controversy of the 80s and 90s, when illegal cheap vans popped up in response to the 1980 transit strike. Licensing for dollar van drivers became available in 1994, but the great majority of dollar vans continue to operate without TLC licenses in neighborhoods with poor access to public transportation. Lyft was meant to fill a similar gap, offering a significantly cheaper alternative to cabs and Uber alike by employing locals with their own cars. We’ll see how this plays out, but we doubt Lyft will get away with undercutting the TLC and its army of cabbies. Maybe in other cities, but not in taxi-dependent New York.

Follow Nikita Richardson on Twitter @nikitarbk


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