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Despite the Court's Ruling, Uber's Battle Will Continue

07/04/2015 11:30 EDT | Updated 07/04/2016 05:59 EDT
AP Photo/Julio Cortez, File

An Ontario Superior Court judge ruled Friday that popular ride-sharing service Uber is not breaking Toronto's taxi laws. The city had sought a court injunction ordering Uber to cease operations in Toronto, arguing it was operating as an unlicensed taxi brokerage. Justice Sean Dunphy disagreed, ruling Uber was not operating as a taxi brokerage and dismissing the city's application.

Uber and its many fans are rejoicing. Toronto's taxi industry, unusually united from drivers to owners to brokerages, is fuming. And city officials are likely conferring behind closed doors to plot a path forward. Doing nothing seems an unlikely option.

The judge's decision focused on the narrow definition of "taxicab service" in Toronto's bylaws and the definition of a taxi broker as one who "accepts" requests for transportation. He accepted Uber's argument it did not "accept" requests for transportation, ruling the city's argument interpreted the word "accept" far too broadly.

I'm not a lawyer, but having worked a while at City Hall, I expect this leaves the city with three basic choices: it can accept Uber is unique and stop fighting it; it can seek leave to appeal the court's decision arguing the justice was wrong in law; or, it can rewrite the law to include services like Uber under its regulatory regime. My money's on the last option.

City can't walk away now

The first option, walking away and letting Uber win, is not one the city can choose. It would leave Toronto's taxi industry in a shambles that would, in short order, result in its disintegration. If Uber can be exempt from city regulation just because it uses an online app to aggregate and direct hails for service, then it won't be long before that is the de facto business model of every other player.

Existing taxi brokers will double-down on their own mobile applications and shutter their telephone dispatch operations. They'll try to use the value of their well-known brands to command market share in a new world of app-based taxi services. Taxi drivers will abandon their expensive taxi licences and simply accept app-mediated fares; they'll save a ton of money, maybe free themselves from bad contracts with car and plate owners, and try to make a go of it in the new world. Their driving experience could make them highly successful in a post-Uber world.

The big losers in this world are likely those poor suckers who recently purchased standard cab plates. These can trade on a shadowy market for up to $200-300,000. Post-Uber, they're all but worthless. Those holding many licences will lose the most as the market value of their plates collapses; but, many paid little or nothing for these assets years ago and have ridden the market price up like railroad shares before the last spike was planted. If they've borrowed money against the plates, they may be in trouble. Still, it's hard to lose much sleep over their plight. Live by the market, die by the market.

On this path, the city will soon find itself regulating an industry that no longer exists.

City may appeal

The city may appeal the decision. It's possible the judge made an error in law and, before anyone invests heavily in rewriting the rules or rebuilding an industry, it may be desirable to run the case through an appellate court just to make sure there aren't any more surprise rule changes coming from the legal arena. But who would pay for this? The city may want to, but it may be easier for it just to rewrite its laws. Taxi companies may want to, but I'm not sure how they do so, given they weren't a party to the original case.

Rewriting the rules makes sense

I expect the city will seek to rewrite its taxi regulations to cast a broader net. In a perfect world, it would begin from scratch and design new regulations to be minimalist while providing incentives for the development of a reliable, affordable, high-quality, convenient and efficient private hire-car transportation service that augments public transit. Of course, in a perfect world, we wouldn't have politicians or lobbyists. But we do.

I don't expect this re-writing will happen quickly. The industry is a roiling nest of competing interests. The plate owners, who stand to lose the most, will fight hard to make the new rules subject Uber to the same tough regulatory yoke they've already mastered. Taxi brokers may argue for a loosening of the rules so they can do what they want, just like Uber.

Drivers may find themselves, in the new post-Uber world, with more in common than they had before. They may band together, owner-operators and contract drivers alike, to lobby for a new regulatory universe that gives them greater flexibility and allows them to keep a higher share of the fare revenues than ever before. Who will speak for consumers? Likely no one.

No matter what happens, the next two years will be a very interesting time in Toronto's taxi universe. Uber allies? It remains to be seen.

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