Taxi Protectionism in Portland Lands City in Federal Court

Taxi Protectionism in Portland Lands City in Federal Court
June 18, 2012

Tim Kelly

Tim Kelly is a political cartoonist, policy advisor, columnist for the Future of Freedom Foundation... (read full bio)

Portland, Oregon officials have made it a crime for certain businesspeople to give customers more value for their dollar. Now the city is in federal court trying to defend the constitutionality of their action.

In 2009, Portland passed an ordinance requiring a $50 minimum fare for limousine and sedan rides to or from Portland International Airport. The ordinance imposes a citywide minimum fare that requires limos and sedans to charge at least 35 percent more than what taxis would charge for the same route and imposes a minimum wait time of at least one hour before customers may be picked up.

Two local companies, Towncar.com and Fiesta Limousine, ran afoul of the ordinance when they offered promotional $32 one-way trips to the airport on the website Groupon.com. The city’s Revenue Bureau threatened to suspend their operating permits and impose fines totaling $895,000.

Both companies canceled the promotions and refunded their customers to avoid the penalties. They also decided to take the city to court.

The Institute for Justice, a self-described libertarian public interest law firm, is representing Towncar.com and Fiesta in a federal lawsuit challenging the constitutionality of Portland's limousine and sedan regulations.

‘Naked Economic Protectionism’

"These laws amount to nothing more than naked economic protectionism. They are designed to protect the profits of Portland's taxicab companies, and now they are being enforced at everyone else's expense," said Institute for Justice Attorney Wesley Hottot, who represents the two plaintiffs. "Portland's minimum-fare law and minimum wait time have nothing to do with protecting the riding public. They have everything to do with protecting the city's taxicab companies from competition and driving up prices for consumers.”

"We had 630 Portlanders who bought our Groupon deal," said plaintiff Mike Porter, who runs Towncar.com. “The city responded by threatening to put me out of business for charging my customers too little. How is that good for consumers?”

“Portland has a long history of protecting favored businesses by, in effect, outlawing their competitors. The result has been fewer entrepreneurial opportunities and higher prices for consumers. Hopefully this time the courts will step in to protect both competitors and consumers alike,” said Steve Buckstein, senior policy analyst for the Portland-based Cascade Policy Institute.

Similar Actions Elsewhere

A similar case is being fought in Bloomington, Illinois, where a local ordinance is preventing Julie Crowe, a Marine Corps veteran in her 50s, from offering a vehicle-for-hire service.

The Bloomington ordinance requires a person who wants to provide ride services to apply with the city. The city government must hold a hearing where all existing vehicle service operators may say whether they believe a new competitor is necessary.

To no one’s surprise, Bloomington’s existing operators testified against Crowe’s application. Crowe later received a one-sentence rejection notice from the city manager that read, “The City of Bloomington has determined that there is not a need to have an additional Vehicle for Hire Shuttle, there [sic] your request has been denied.”

State Court Challenge

The Liberty Justice Center, the public interest litigation center of the Illinois Policy Institute, has filed a lawsuit on Crowe’s behalf in state court.

Jacob Huebert, an associate counsel for the Center, said “the city’s licensing scheme is both unjust and unconstitutional. A law giving a city bureaucrat the power to arbitrarily deny a license because he or she doesn’t find it ‘desirable’ violates the Illinois Constitution’s guarantee of due process of law. So do the city’s hearing procedures, which don’t allow an applicant to cross-examine the people who testify against her or to offer rebuttal evidence.”

Towncar’s, Fiesta’s, and Crowe’s stories are not unique. According to the Institute for Justice, nine other jurisdictions nationwide have adopted minimum fares for limo and sedan service.

"Nationwide, minimum fares are being pushed by politically powerful taxicab companies at the expense of both limousine companies and the riding public,” said IJ attorney Jeanette Petersen. “Most would agree that regulation concerning public safety is reasonable. These laws are all about protecting the profits of privileged companies, not the public. That is not only wrong, it is unconstitutional."

Tim Kelly (tkelly67@comcast.net) is a political cartoonist, policy advisor, columnist for the Future of Freedom Foundation, and a correspondent for Radio America's Special Investigator.

Tim Kelly

Tim Kelly is a political cartoonist, policy advisor, columnist for the Future of Freedom Foundation... (read full bio)