On January 30, popular ride share apps Lyft and Juno filed suit again the New York City Council to block a law that requires to them pay a “minimum rate” to drivers at $17.22 per hour — or $26.51 per hour before expenses.
Why is it bad for Lyft and Juno?
If the law is applied as planned on February 1st, today, it advantages ride share leader, Uber, to the detriment of Lyft, Juno and smaller companies in the space. These taxi apps use a “utilization rate” – a formula that calculates how much work drivers are paid per each minute and per each mile driven.
Uber with its larger share of the ride share market, has a higher utilization rate when compared to Lyft and Juno. Under the law Lyft, Juno, Uber would pay equally despite Uber’s busier drivers. Lyft and June claim that the law discriminates against smaller companies and advantaging bigger scale companies like Uber. As Lyft’s spokesperson commented, it gives “an automatic and perpetual advantage” to Uber.
Overlooked, however, is Via — also a relatively smaller ride share operator — that hasn’t joined Lyft and Juno in their quest to block the law.
Who’s at fault?
When Uber first offered its services in May 2011 it flipped the city’s transportation market upside down, leaving the city’s Taxi and Limousine Commission flat footed amidst increasing congestion, decreasing driver wages, and devaluing taxi medallion prices. Drivers fled traditional taxi companies for their new tech-savvy competitor along with consumers who liked being able to see where their driver was located along with generally lower prices.
Thus, the latest law promulgating from the New York City Council wasn’t its first attempt to narrowly regulate the ride share industry. But in this case due to Uber’s market share, the latest law provides a relative advantage for the company. Juno and Lyft, being later entrants to the New York market continue to face an increasingly uphill battle against their entrenched, better funded, and larger competitor. Juno in some respects departed from its feel-good populist messaging; instead it appears to defend what it calls “fair competition” and rejects the idea of a minimum wage. In its response, Juno wrote:
“[the law] is inherently flawed and fundamentally unfair; severely and disproportionately hurts smaller, socially-conscious companies like Juno; and will destroy competition in the New York City ride-hail market.”
Mayor Bill de Blasio weighed in on the law via Twitter to say that capping app-based ride sharing platforms and implementing a higher minimum pay rate — already among the highest in the world, was his prerogative. de Blasio blasted ride sharing companies calling them:
“Unconscionable. The overwhelming majority of these companies’ drivers earn less than minimum wage. We won’t stand for it in New York City, and we’ll fight every step of the way to get workers the pay they deserve.”
It is the latest challenge to the New York City Council to weigh what some call “fair opportunities” against a wave of new, app-based technologies that, for the most part, make create jobs and improve lives. The latest legal volley marks one milestone among many attempts by larger players to make use of government to advantage themselves over their smaller peers.