How a Class E Chauffeur’s License and the Supremacy Clause can Cure UBER’s insurance issues, unfair tax and regulation exemptions, and their monopolistic practices against taxi companies and contract drivers

October 4, 2016

A New Mexico Class ‘E’ Chauffeur’s License will Solve Uber Safety Issues

The Transportation Network Services Act is Preempted by the Supremacy Clause

Predatory Pricing and Vertically Integrated Monopoly

Uber Contractors Operating Without Insurance

Synopsis:

The 2016 NM Transportation Network Services Act [TNSA] is only six-months old, but is fatally flawed.

It is in direct conflict with Federal Motor Carrier Safety Administration [FMCSA] regulations and definitions, and its insurance ‘scheme’ has gaps of non-coverage.

Especially as the Uber app facilitates interstate transportation, it is subject to federal laws the TNSA purports Uber exempt. Therefore, New Mexico’s TNSA is preempted by the Supremacy Clause.

New Mexico’s legislature was pressured into accommodating Uber, however, the Uber phenomenon is not a ‘new’ technology requiring special treatment. Uber did not invent GPS or first associate Smartphone GPS with a tracking app. Uber did, however, use Disruptive Marketing to take over local taxi business, forcing its way in while hiding from regulators in the ‘ether’ of the Internet, openly challenging state enforcement of regulations, business taxes; and while violating antitrust law.

In comparison, nine months prior to Uber, Call-A-Cab® launched a GPS taxi logistics ‘peer-to-peer’ website perfect for Smartphones, but also accessible by PC, tablet, and landlines. And Call-A-Cab did it legally.

The following analysis of the 2016 NM TNSA is not intended to put Uber out of business. Uber is a very popular Smartphone app. However, the State of New Mexico must modernize its Motor Carrier and MVD statutes in order to promote its legitimate interest in public safety, and end Uber’s monopolistic practices of predatory pricing and blocking competition.

The current Uber business model, as described in the TNSA, unfairly exploits its contractors and their vehicles, perpetuates monopolistic practices, and at times leaves drivers and passengers completely uninsured.

On the other hand, if the measures suggested in this analysis are adopted, Uber can continue doing business, its contract drivers will have more opportunities earn a fair income, and taxi companies and their drivers can participate as well.

In 2011, the first 4G LTE Broadband Smartphones were introduced (3G was not fast enough to handle streaming GPS data) and in 2013 Albuquerque taxi driver, Leonard Daneman, launched the Call-A-Cab® GPS Taxi Logistics website. https://taxiabq.com He also designed a GPS tracking website called GPS ON TIME. http://www.gpsontime.com

Uber and Lyft entered the Albuquerque market illegally in 2014 and in 2015 their Predatory Pricing practices decimated local taxi fleets. Call-A-Cab® was in striking distance of competing head-to-head with Uber, but Uber dropped their rates from $2.25 to 85 cents per mile. Call-A-Cab went from thirty subscribed drivers (our target for optimal logistics was fifty) to only four.

Added: November 13, 2016–Desoto Cab Company of San Francisco agrees with my year of complaints against Uber’s Predatory Pricing and on November 2, 2016 filed Desoto vs. Uber in Federal Court. See Desoto Cab Co vs Uber Technologies

While Call-A-Cab’s website redirects about $10,000 in taxi customers to three cab companies, no cab company will adopt Call-A-Cab’s GPS logistics to its dispatch office. Yellow Cab liked Call-A-Cab and eventually computerized its dispatch office, but at that time did not appreciate the value of Call-A-Cab’s peer-to-peer website; which is unfortunate because it would have put Yellow Cab a year ahead of Uber and Lyft.

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UBER can be subjected to state and federal Motor Carrier safety regulations simply by adopting the Class E Chauffeur’s License into New Mexico law.

 

IN ADDITION, once Uber is brought into compliance, existing taxi companies and drivers can participate and profit while providing superior services to the public, not just smartphone users.

Uber has fatal flaws. Its insurance scheme at times leaves Uber drivers uninsured. In addition, Call-A-Cab’s GPS website does what Uber can’t: it can distribute calls both through taxi dispatch and directly to drivers from business landlines, accept cash fares, and its interactive GPS Logistics Map can specify types of vehicles and passenger capacity.

The Class E Chauffeur’s License

A good model to follow is the law used by the state of Missouri. They force Uber into the federal definition of ‘for hire,’ require ‘taxi’ license plates, and also control proof of commercial insurance. Some states require periodic vehicle inspections. Commercial vehicle inspections can be monitored by taxi companies who are already organized to facilitate Motor Carrier Act compliance.

Taxi Companies Will Not Just Survive, But Profit

Taxi companies not only lease taxicabs, but micromanage Motor Carrier Act compliance. The state Class E license application would take over the initial driver tests, checks, and inspections; the taxi companies would then take over compliance oversight charging a monthly fee to both Uber and taxi drivers using personal cars for commercial passenger transport.

Uber created the Transportation Network Services Act [TNSA] to avoid taxes and obstruct regulation under federal and state Motor Carrier laws, however, that in itself may be its undoing:         

Question:       Is New Mexico’s 2016 Transportation Network Services Act [TNSA] preempted by the Federal Motor Carrier Safety Administration [FMCSA]?

Answer:          Yes. A state statute must not conflict with, contradict, or obstruct enforcement of federal law. Under public policy and legitimate state interest, commercial interstate transportation of passengers is subject to federal and state safety regulations.

Conclusion:    A New Mexico Class E license would facilitate ‘for hire’ drivers meeting New Mexico Motor Carrier Act, FMCSA safety, and commercial insurance regulations.

Discussion:     Generally speaking, a state statute is preempted by the Supremacy Clause if it violates, contradicts or obstructs enforcement of federal law. Azar vs Prudential Insurance Company, 68 P.3d 909 (2003) 133 N.M. 669 2003-NMCA-062[1]

The New Mexico Motor Carrier Act regulates commercial transportation as public policy; the state having legitimate interest in the safety and welfare of citizens using ‘for hire,’ or commercial cars and taxis. State Motor Carrier regulations follow FMCSA guidelines.

These regulations, from which Uber declares itself exempt, apply to Uber even more considering Uber operates not only locally but as an Interstate Carrier. Just set your Uber app’s destination from Albuquerque to Denver or El Paso, and you will see for yourself.

The following section of Uber’s 2016 Transportation Network Services Act [TNSA] is in conflict with Federal law:

SECTION 3. NOT OTHER CARRIERS.–Transportation network companies and transportation network company drivers shall not be subject to the Motor Carrier Act or deemed[2] to provide any transportation service as defined in the Motor Carrier Act. A transportation network company driver shall not be required to register a personal vehicle as a commercial vehicle or vehicle for hire.[3]

Federal Motor Carrier Safety Regulations; General

  • 390.5: Definitions. Driver means any person who operates any commercial motor vehicle. . . . For-hire motor carrier means a person engaged in the transportation of goods or passengers for compensation;

 As followed by the Missouri Class E License:

Individuals who may need to obtain a Class E license include:

  • Daycare employees.
  • Uber or Lyft drivers.
  • Limo drivers.
  • Taxi drivers.
http://www.dmv.org/mo-missouri/special-licenses.php#Class-E-Drivers-Licenses

Uber’s Predatory Pricing and Monopolistic Insurance Scheme

Uber’s proprietary app and insurance are essentially ‘non-compete’ conditions in their driver contract creating a Vertically Integrated Monopoly. There is no reasonable non-fleet commercial insurance available for other business models and Uber drivers aren’t insured if they stray from the Uber app.

The insurance scheme approved for the Transportation Network Services Act is not standard commercial insurance, but an electronically controlled scheme tied directly to the Uber app. Unless they have their own commercial insurance, Uber drivers have limited or no insurance under some circumstances while in Part A and B.

In addition, if an Uber driver takes a ‘personal’ call, they are operating with ZERO liability insurance. These are serious ‘gaps’ in Uber insurance and underwriters in some states are scrambling to create ‘gap insurance.’ But, that is not good enough.

Also in violation of Antitrust law is Uber’s past year of dropping their rates from $2.25 to 85 cents per mile. Not only is this incredibly exploitive of Uber drivers and cars, it is Predatory Pricing according to both state and federal Antitrust law.

Predatory Pricing is a foreign corporation using below cost prices with the intent[4] to take over a local market (predation), knowing that increasing prices without competition will recover their losses (recoupment).[5]

A pricing scheme secondary to Uber’s predation is their refusal to collect gross receipts taxes from fares collected through the app, or pay gross receipts on commissions paid out to drivers.[6] Uber evaded taxes from their inception, but legalized their tax fraud scheme in the vague language of the 2016 TNSA, Section 18:

SECTION 18. CONTROLLING AUTHORITY.–

  1. No municipality or other local entity may impose a tax on or require a license for a transportation network company, a transportation network company driver or a vehicle used by a transportation network company driver where a tax or license relates to providing prearranged rides or subjects a transportation network company to the municipality’s or other local entity’s rate, tax, license, entry, operational or other requirements, except for generally applicable business licenses or taxes.

This is unfortunate and unfair to legal taxi companies, and Call-A-Cab. The only way to correct this inequity is to preempt and or repeal the TNSA through the Supremacy Clause. 

Added: November 13, 2016–Desoto Cab Company of San Francisco agrees with my year of complaints against Uber’s Predatory Pricing and on November 2, 2016 filed Desoto vs. Uber in Federal Court. See Desoto Cab Co vs Uber Technologies

Summary of a Statutory Solution:

  1. Class E License — Uber drivers fall under the federal definition of ‘for hire’ and must apply for a Class E Chauffeur’s License. That would resolve the federal and state safety issues now ignored by Uber. Federal preemption under the Supremacy Clause would void Uber’s TNSA exemptions.
  2. With a Class E License and reasonable non-fleet (half the operational hours) ‘for hire’ commercial insurance, GPS ‘peer-to-peer’ logistics will be available to all citizens including hospitals, hotels, bars, restaurants, and anyone using just a landline.
  3. It is known nationwide that Uber’s commercial insurance has holes in coverage. Many states are scrambling to create ‘gap’ insurance.[7] Once the Class E license is law, the insurance companies must provide an appropriate commercial insurance policy (not a ‘gap’ patch) for ‘personal’ cars used for-hire. At about half the rate of fleet taxis leased ‘24/7,’ this insurance will be affordable as a fixed business cost for all but the most ‘part-time’ drivers.
  4. These solutions will permit both Uber and Taxi drivers to accept calls through Call-A-Cab’s GPS Logistics, or any other competing dispatch services for independent contract carriers.

I would appreciate your interest in my years of research and building Call-A-Cab. The next step, with your support and approval, is scheduling a presentation before the NMPRC.

 

[1] {30} Federal law may preempt state law under the Supremacy Clause, U.S. Const. art. VI, cl. 2, by “express provision, by implication, or by a conflict between federal and state law.” New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995); Hennessy v. Duryea, 1998-NMCA-036, ¶ 6, 124 N.M. 754, 955 P.2d 683. “The purpose of the preemption doctrine is to allow Congress to promulgate a uniform federal policy without states frustrating it through either legislation or judicial interpretation.” Largo v. Atchison, Topeka & Santa Fe Ry. Co., 2002-NMCA-021, ¶ 6, 131 N.M. 621, 41 P.3d 347. Courts, however, apply a strong presumption against preemption, particularly in areas of law that are traditionally left to state regulation. Hennessy, 1998-NMCA-036, ¶ 8, 124 N.M. 754, 955 P.2d 683; Montoya v. Mentor Corp., 1996-NMCA-067, ¶ 7, 122 N.M. 2, 919 P.2d 410. {31} “Whether federal law preempts state law is generally a question of congressional intent.” Srader v. Verant, 1998-NMSC-025, ¶ 7, 125 N.M. 521, 964 P.2d 82. “`When Congress has considered the issue of preemption and has included in the 921*921 legislation a provision expressly addressing the issue,’ we need only identify the domain expressly preempted by the federal statute and may infer that matters beyond that domain are not preempted.” Hennessy, 1998-NMCA-036, ¶ 6, 124 N.M. 754, 955 P.2d 683 (quoting Montoya, 1996-NMCA-067, ¶ 8, 122 N.M. 2, 919 P.2d 410).

[2] Deem, vb. 1. To treat (something) as if (1) it were really something else, or (2) it has qualities that it doesn’t have . . . Black’s Law Dictionary, Seventh Ed. 1999

[3] See also TNSA §§ 2, B. (2) and 2, C.

[4] Uber CEO Kalanick made it publicly known he was out to destroy ‘big taxi.’ http://recode.net/2014/05/28/travis-kalanick-uber-is-raising-more-money-to-fight-lyft-and-the-asshole-taxi-industry/

[5] Below-cost pricing intended to eliminate specific competitors and reduce overall competition is known as predatory pricing. Section 2 disallows this conduct. In Brooke Group Ltd. v. Brown & Williamson Tobacco, 509 U.S. 209 (1993), the U.S. Supreme Court devised a two-part test to determine if predatory pricing had occurred. First, the plaintiff must establish that the defendant’s production costs surpass the market price charged for the item. Second, the plaintiff must establish that a “dangerous probability” exists that the defendant will recover the investment in above-cost inputs. In Weyerhaeuser Co. v. Ross-Simmons Hardwood Lumber Co., Inc. (05-381) (2007), the Supreme Court said that this test also applies when determining if a predatory bidding scheme exists.

[6] New Mexico Taxation and Revenue could find no gross receipts tax filings for Hinter-NM, LLC, Uber’s registered business name in New Mexico. See Connie L. Dayton, CPS, CFE, CFF, Forensic Tax Auditor, 505-841-6687 connie.dayton@state.nm.us

See  http://uberpeople.net/threads/uber-and-lyft-car-insurance.60340/

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