New
York became the first major American city on Wednesday to halt new
vehicle licenses for ride-hail services, dealing a significant setback
to Uber in its largest market in the United States.
The
legislation passed overwhelmingly by the City Council will cap the
number of for-hire vehicles for a year while the city studies the
booming industry. The bills also allow New York to set a minimum pay
rate for drivers.
Uber has become one
of Silicon Valley’s biggest success stories and changed the way people
across the globe get around. But it has faced increased scrutiny from
government regulators and struggled to overcome its image as a company
determined to grow at all costs with little regard for its impact on
cities.
New York’s move to restrict the number of ride-hail vehicles and to establish pay rules for drivers
— another step no other major city has taken — could provide a model
for other governments that want to rein in the industry. New York’s
aggressive stance also raises questions over how fast Uber can continue
to grow as the company, which has been valued at $62 billion, plans to move toward an initial public offering next year.
The
proposal to cap ride-hail companies led to a clash among interest
groups with taxi industry officials saying the companies were dooming
their business and Uber mounting a major advertising campaign to make
the case that yellow cabs have a history of discriminating against
people of color.
Mayor Bill de Blasio
and Corey Johnson, the City Council speaker, said the bills will
curtail the worsening traffic on the streets and improve low driver
wages.
“We
are pausing the issuance of new licenses in an industry that has been
allowed to proliferate without any appropriate check or regulation,” Mr.
Johnson said before the vote, adding that the rules would not diminish
existing service for New Yorkers who rely on ride-hail apps.
Mr.
de Blasio praised the bills and said he planned to sign them into law.
The cap on new for-hire vehicles would take effect immediately.
“More
than 100,000 workers and their families will see an immediate benefit
from this legislation,” Mr. de Blasio said, referring to the city’s army
of for-hire drivers. “And this action will stop the influx of cars
contributing to the congestion grinding our streets to a halt.”
But
Uber has warned its riders that the cap could produce higher prices and
longer wait times for passengers if the company cannot keep up with the
growing demand. Ride-hail apps have become a crucial backup option for
New Yorkers swept up in the constant delays on the city’s sputtering
subway, as happened on Wednesday when signal problems again snarled
train lines across a large swath of the city. Ride-hail services have
also grown in neighborhoods outside Manhattan where the subway does not
reach.
The battle over Uber’s future
in New York has been prompted in part by growing concerns over financial
turmoil among drivers — a problem underscored by six driver suicides
in recent months. On Wednesday, a large group of drivers rallied
outside City Hall before the vote and held signs displaying the names of
the drivers who took their lives.
New
York is the latest city to grapple with questions over how to regulate
the company. In London, Uber’s most lucrative European market, Uber
recently regained its taxi license after the company agreed to stricter
regulations, including providing the city with the trove of traffic data
that the firm collects and has often been reluctant to share. Uber has
also faced regulatory battles in American cities, like Austin, Tex., and
in countries like Canada, Brazil and Italy.
In
Seattle, the City Council approved a bill allowing Uber drivers to form
unions, but the measure has faced a legal challenge. Uber left Austin
in 2016 after the City Council passed a measure requiring the company to
perform fingerprint background checks, though Uber later returned to
the city. The mayor of Honolulu recently vetoed a bill to cap price increases by Uber during busy periods.
The
company’s new chief executive, Dara Khosrowshahi, has embarked on a
global charm offensive to repair the company’s image after a series of controversies, including complaints among workers over gender discrimination and harassment.
Uber
criticized the Council’s decision to approve the cap, but said the
company would work to keep up with the increasing appeal of its service
despite the limit on new vehicles.
“The
City’s 12-month pause on new vehicle licenses will threaten one of the
few reliable transportation options while doing nothing to fix the
subways or ease congestion,” Josh Gold, a spokesman for Uber, said in a
statement.
Anand Sanwal, chief
executive of CB Insights, a software company that examines technology
trends, said the cap could impact Uber’s public offering if it reduces
revenues and emboldens other cities to take similar action.
“If
it changes their growth trajectory, that could have an impact on their
valuation and the narrative around the company,” Mr. Sanwal said.
Uber
said the company would immediately reach out to tens of thousands of
for-hire vehicle owners who are already licensed but work for other
local car services and try to recruit them to work for Uber. The company
said it would also continue to press for another solution, known as
congestion pricing — a proposal to toll drivers entering Manhattan’s
busiest neighborhoods and that would require approval from state
lawmakers.
Many experts believe
congestion pricing is the best way for New York City to fix congestion
and secure the funds needed to fix the subway. Mr. Johnson supports the
idea, but Mr. de Blasio has opposed it. Gov. Andrew M. Cuomo, who
controls the subway, has said he will push for congestion pricing during
the next state legislative session to help pay for an ambitious,
multibillion dollar overhaul plan for the subway.
The
City Council approved the cap in a 39-to-6 vote. Councilman Eric
Ulrich, a Republican from Queens, said he opposed the cap, arguing that
limiting Uber to help yellow taxis was similar to regulating Netflix,
the streaming service, to help Blockbuster, the video rental chain.
The
legislation allows for the city’s taxi commission to add more licenses
if there is a clear need for more vehicles in some neighborhoods. In New
York, many Uber drivers work full time and the city regulates Uber
vehicles as part of the for-hire vehicle industry, which is different
than other cities.
The City Council also moved recently to regulate Airbnb, another tech company that has upended the hotel industry. Mr. Johnson, a Democrat who became City Council speaker in January,
has quickly taken bold steps to make a name for himself on high-profile
issues, including convincing the mayor to pay for half-price MetroCards
for poor New Yorkers.
Many taxi and Uber drivers say they support the cap proposal.
They hope it will halt the flood of new vehicles clogging city streets
and allow them to make more trips and improve their earnings. Uber and
other ride-hail services could add new vehicles only if they are
wheelchair accessible.
Lyft, the
second most popular app in New York, also criticized the vote: “These
sweeping cuts to transportation will bring New Yorkers back to an era of
struggling to get a ride, particularly for communities of color and in
the outer boroughs,” Joseph Okpaku, a vice president at Lyft, said in a
statement.
The vote was a moment of
vindication for Mr. de Blasio, a Democrat, who lost a bruising battle
with Uber over a proposal for a cap in 2015. Since then, the number of
for-hire vehicles in the city has surged to more than 100,000 vehicles,
from about 63,000 in 2015, according to the city.
The taxi industry has also been decimated by Uber’s rise.
The price of a taxi medallion, which is required to operate a taxi in
New York, has plunged from more than $1 million to less than $200,000.
Elizabeth
Cassarino, a yellow taxi driver, said she supports the cap and hopes it
will improve business for taxis. As she drove a taxi through the
clogged streets of Manhattan on Wednesday, she said her credit cards
were maxed out and she had trouble making enough money to pay for food.
“Finally,” she said. “We’re starving to death.”
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