FIFTH STREET — A technology company that creates software for users to get rides with town cars through their cell phones and other Internet-capable devices was issued a citation Thursday for operating in the city without a business license.

Uber, which allows people to arrange and pay for rides using a phone application, text message or through the web, has multiple offices in Santa Monica, including a temporary location on the 1600 block of Fifth Street.

That physical presence means they need a license to operate in the city, said Salvador Valles, business operations manager for City Hall.

The company never paid for a license despite encouragement from city officials during an amnesty period in which they could have dodged most of the penalties for not having one.

The offer was only made to businesses without a license that had never signed up for a business license in the past.

If the company just dispatched drivers to pick up passengers here but did not have offices, the license would not be necessary, Valles said.

Uber did not respond to multiple requests for comment.

For many, it’s less about the licenses that Uber needs to have to work in Santa Monica, and more about those that it does not.

The service connects passengers directly to private drivers that are either licensed professional drivers or local drivers who have passed a background check and a driving record check.

The model means that Uber does not qualify for regulation under the Santa Monica’s taxi franchise system, a regulatory system created in 2010 that chose five taxi cab companies through a competitive process to operate within the city limits.

Those five — Taxi! Taxi!, Metro Cab, Bell Cab, Independent Cab and Yellow Cab — are allotted a specific number of cars that can pick people up within the city and wait at taxi stands.

The companies pay for that privilege through increased regulation, including a requirement to keep specific rates, submit to regular inspections, purchase insurance and participate in a drug testing program, amongst other things.

Instead, Uber and other town car systems like them are regulated by state government, and not heavily, Valles said.

“Cities have been aggressive about implementing regulations on taxi cabs; the state has not been as aggressive,” Valles said.

That really hurts taxi drivers, said one driver who operates in Santa Monica who would only give his first name, Julian.

“It does, but there’s nothing we can do about it,” Julian said. “That’s a big issue to deal with, to be honest with you. People do whatever they want to do.”

And, without oversight by the state, so can many of the car-for-hire companies.

While Uber has a vetting process for its drivers, other companies do not, and there’s no requirement for safety checks on the cars used to transport passengers to and fro.

It’s been a problem for taxi companies in cities on both coasts and everywhere in between that have to compete with Uber, Lyft and other car-for-hire services that operate using phone applications.

The instantaneous nature of those apps have left many asking what, exactly, differentiates them from the traditional taxi companies, which also use mobile apps to connect drivers and riders.

One distinction lies between “hailing” a cab and “arranging” a ride through a town car service, two actions that can seem practically the same for the user but may be accomplished in different ways, depending on the type of service used, according to a memo by the Windels Marx, Lane & Mittendorf law firm.

Uber, for instance, arranges a service directly with an independent driver, whereas companies like TaxiMagic or GetTaxi arrange taxicab service.

“Is the typing-in of your location and summoning a vehicle, whether for-hire or a taxicab, considered an on-demand electronic street hail, or a prearranged service?” the paper reads. “Most jurisdictions have yet to answer these questions.”

The federal government does not seem open to attempts by some states to regulate the businesses, in spite of the potential dangers of unregulated cars providing transportation to the public.

The Federal Trade Commission wrote a letter to the Colorado Public Utilities Commission on March 6 objecting to proposed regulations that would have required “charter contract transportation” to charge a specific fixed price and prohibiting luxury limousines and other vehicles from setting up in front of motels, hotels, restaurants and other locations.

“FTC staff is concerned that these three proposed changes may significantly impair competition in passenger vehicle transportation services, including innovative methods of competition enabled by new software applications …,” the letter reads.

Although things seem up in the air now, many professionals expect that the software companies may be the wave of the future in the car-for-hire industry.

“The headwinds are in Uber’s favor,” Valles said. “The concept of electronic hailing and how to secure a vehicle for hire, that model is one that is in its infancy and will probably begin to dominate in five to 10 years.”


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