Cabbies Sue Milwaukee Over Permit Limits Blocking Competition

Cabbies Sue Milwaukee Over Permit Limits Blocking Competition
October 14, 2011

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

Three Milwaukee taxi drivers have filed a federal lawsuit alleging the city has outlawed competition in the taxi market, causing permits to rise in price from $85 to a staggering $150,000.

The Institute for Justice, a national public interest law firm, filed the lawsuit on behalf of taxi drivers Ghaleb Ibrahim, Jatinder Cheema and Amitpal Singh.

Milwaukee County Supervisor Joe Sanfelippo’s brother Michael controls 162 of the city’s 321 taxi permits and runs American United Taxi Cab Co., a taxi dispatch service.

“In the classic story of entrepreneurship, someone starts a taxi business in order to save up enough money to buy a house,” said IJ Staff Attorney Anthony Sanders, lead counsel in the lawsuit. “In Milwaukee, you need to save up enough money to buy a house just to start a taxi business.”

Market Limited Since 1991

In 1991, the city of Milwaukee prohibited any new entrepreneurs from entering the taxi market. The city council imposed a hard cap of 321 taxis for the entire city; thereafter, the only way to get a taxi permit was to purchase one from an existing permit holder. As a result, today the city has just one taxi for every 1,850 residents (compared to 1 in 90 for Washington, DC and 1 in 480 for Denver) and taxi permits have risen in price from $85 to $150,000—more than the average cost of a house in Milwaukee, according to the IJ.

“It isn’t the government’s role to play favorites, protecting a special few from competition,” said Sanders. “If the government tried to artificially limit any other industry, saying only 30 restaurants or three hardware stores could operate in town, everyone would agree it’s completely arbitrary and wrong.”

Benefits Entrenched Businesses

Sanders said the city’s taxi law does nothing but funnel money to a small group of entrenched businesses at the expense of entrepreneurs, who lose out on opportunities, and at the expense of consumers, who face poor service and long wait times.

Michael Sanfelippo told the Milwaukee Journal-Sentinel newspaper the quality of cabs and service suffered before the city imposed a limit on the number allowed to operate in the city.

"This is not a cab town," he said.

He also disputed the claim that taxi permits can sell for as much as $150,000 each. “I think the last couple I bought were maybe $80,000," he told the Journal-Sentinel.

Ibrahim said he started driving a taxi in Milwaukee in 1983, when a license cost $85. He insists the cost for a permit now can hit $150,000.

“It isn’t the place of the government to say what the right size of the market is,” Sanders said. “That should be left up to cab owners and their customers.”

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)