FTC Staff Comment Before the City Council of the City of New York Concerning Bill No. 700 to Increase the Number of Licensed Taxis

BUREAU ()l' COMPElITION
Ut-.:ITED ST ATES OF AMERICA
FEDERAL TRADE CO!\1MISSION
WASH1NGTOS. D.C. 20580
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'l'tfi~ '\ '.... 1· #~ •	
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December 	11, 	1986
The 	Honorable 	Andrew 	Stein
Presldent, 	City 	Council 	of 	the
Clty 	of 	New 	York
City 	Hall
New 	York, 	New 	York 	10007
Attn: 	Yvonne 	Gonzalez, 	Esq.
Asslstant 	Counsel
Dear 	Mr. 	Stein:
The 	staff 	of 	the 	Federal 	Trade 	Commlssionll 	is 	pleased 	to
comment 	on 	Bill 	No. 	700, 	a 	proposal 	to 	increase the 	number 	of
licensed 	taxicabs 	in 	New 	York 	Clty. 	We 	support 	the 	goal 	of 	the
proposal, 	because 	we 	conclude 	that 	regulatlon 	that 	restricts 	the
number 	of 	taxl 	medallions 	harms 	the 	public 	through 	higher 	fares,
longer 	waiting 	times 	for 	cabs, 	inadequate 	taxi 	service 	for
disfavored 	nelghborhoods, 	and 	reduced 	employment 	and
entrepreneurial 	opportunities 	for 	would-be 	cab 	drivers 	and
owners. 	The 	burdens 	of 	taxl 	regulation 	fall 	most 	heavily 	on 	the
poor, 	the 	elderly 	and 	the 	handlcapped, 	many 	of 	whom 	a~e 	more
reliant 	on 	(and 	expend 	a 	greater 	share 	of 	lncome 	for) 	taxi
seLvlce 	than 	other 	members 	of 	the 	population. 	For 	all 	of 	these
reasons, 	we 	urge 	that 	regulation 	of 	taxi 	medallion 	supply 	be
termlnated 	at 	the 	earliest 	po~siule time •
..
II 	~his 	letter 	presents 	the 	comments 	of 	the 	New 	York 	Regional
Offlce 	and 	the 	Bureaus 	of 	Competition, 	Economics 	and 	Consumer
Protectlon 	of 	the 	Federal 	Trade 	Commission. 	The 	views 	expressed
are 	not 	necessarlly 	those 	of 	the 	Commlsslon 	nor 	of 	any 	lndividual
Commlssloner, 	although 	the 	Commlssion 	has 	authorlzed 	thelr
presentatlon.

~he 	Honorable 	Andrew 	Steln 	3
means 	the 	v1rtual 	absence 	of 	legal 	"for 	hail" 	service.51
Further, 	the 	high 	cost 	and 	low 	ava1labllity 	of 	medall10n 	taxi
serV1ce 	relegate 	the 	City's 	transportat1on 	d1sadvantaged 	-- 	the
poor, 	the 	elderly, 	the 	hand1capped 	-- 	to 	gypsy 	taxicabs. 	Because
gypsy 	cabs 	operate 	unlawfully, 	these 	customers 	"oftentimes
unknow1ngly, 	are 	exposed 	to 	the 	dangers 	of 	riding 	uninsured
veh1cles 	operated 	by 	dr1vers 	of 	questionable 	ab1l1ty, 	training,
or 	credent1als."!iI
Whereas 	fewer 	than 	12,000 	medall10n 	vehicles 	operate 	in 	the
C1ty 	of 	New 	York, 	gypsy 	cabs 	number 	roughly 	14,000.71 	This 	gypsy
market 	1S 	an 	ind1cator 	of 	the 	lawful 	employment 	optlons
foreclosed 	by 	entry 	restrictions 	1n 	the 	"for 	hail" 	segment 	of 	the
taxicab 	market. 	In 	the 	District 	of 	Columbia, 	there 	is 	"open
entry" 	into 	the 	"for 	hail" 	market. 	Not 	surpris1ngly, 	taxicab
availab1lity 	1S 	very 	good, 	and 	ease 	of 	entry 	in 	the 	District 	of
Columb1a 	has 	expanded 	employment 	and 	entrepreneurial
opportun1t1es 	for 	m1nority 	groups.~
51 	Roughly 	four 	out 	of 	every 	f1ve 	medall10n 	taxicab 	fare 	trips
originate 	and 	terminate 	within 	t~e 	borough 	of 	Manhattan. 	Id. 	at
4.11. 	A survey 	conducted 	by 	Urb1tran 	Associates 	(November-r983),
reported 	1n 	the 	Draft 	EIS 	at 	4.68, 	d1sclosed 	that 	25 	percent 	of
respondents 	then 	uS1ng 	medallion 	or 	other 	taxicab 	service 	in 	the
flve 	boroughs, 	excluding 	Manhattan 	south 	of 	96th 	Street, 	would
increase 	taxicab 	usage 	if 	street 	hail 	availability 	were
increased. 	Thirty-three 	percent 	of 	similarly 	situated 	non-user
re~pondents indicated 	that 	they 	would 	use 	taxicab 	service 	i~
street 	hall 	availability 	were 	increased. 	The 	numbers 	for 	the
borough 	of 	Queens. were 	particularly 	stark: 	51 	percent 	of 	taxicab
users 	and 	45 	percent 	of 	non-users 	indicated 	that 	they 	would
respond 	to 	increased 	street 	hail 	availability.
£I 	Dra~t SIS 	at 	4.7.
7/ 	Ie.
Walter 	E. 	Williams 	has 	nnted 	that: 	"While 	blacks
in 	most 	major 	c1t1es 	with 	large 	black 	populations,
than 	70% 	of 	the 	taXiS 	1n Washington. 	Th1S 	is 	no
[1]n 	Wash1ngton 	there 	1S 	virtually 	no 	entry
" 	~he 	Wall 	StI'2et 	Journal, 	June 	11, 	1984, 	at
w1lliares, 	~he State 	~aa1nst Blacks, 	Ch. 	6
Professor
fe·....' 	taxis
t.hey 	0·".'0 	mo r e
acc1dent 	.
regula'c.1on 	.
24. 	See 	also 	W.
(1982-)-.-

~he 	Honc~able 	~n8t€W 	S~eln 	4
Regulation 	of 	entry 	shoulc 	be 	employed 	only 	when 	essential
to 	deal 	wlth 	some 	sort 	of 	market 	fallure, 	a 	condition 	that 	1S 	not
met 	In 	the 	case 	of 	the 	taxi 	1ndustry. 	In 	1984 	the 	Commisslon's
Buteau 	of 	8conomics 	prepared 	a 	report 	ent1tled 	"An 	Economic
4nalys1s 	of 	Taxlcab 	Regulat1on."9/ 	Based 	on 	careful 	study 	of
taxIcab 	regulatlon 	In 	c1ties 	throughout 	the 	country, 	the 	authors
fo~nd 	no 	persuaslve 	ratlonale 	for 	restrict10ns 	on 	the 	total
number 	of 	taxicabs 	or 	for 	absolute 	prohibitions 	on 	fare
COm?etltlon. 	The 	authors 	concluded 	that, 	in 	approprlate
sltuations, 	other 	kinds 	of 	taxlcab 	regulation 	-- 	such 	as 	driver
quallf1cation, 	vehicle 	safety, 	liability 	insurance, 	and 	fare
postIng 	-- 	could 	adequately 	protect 	consumer 	1nterests.
Some 	argue 	that 	a 	host 	of 	adverse 	consequences 	-- 	reduced
safetv, 	1ncreased 	serV1ce 	refusals, 	and 	worsened 	congestion 	and
pollut1on 	WIll 	result 	If 	free 	entry 	is 	allowed 	into 	"for 	hail"
serV1ce. 	We 	strongly 	d1sagree.
F1rst, 	the 	easing 	of 	entry 	restrict10ns 	should 	not 	reduce
safety. 	Regulat10ns 	relating 	to 	safety 	will 	remain 	wholly
1ntact. 	Indeed, 	to 	the 	extent 	that 	safety-regulated 	medallion
tax1cabs 	displace 	unregulated 	gypsy 	cabs, 	the 	safety 	of 	the
public 	may 	well ·be 	enhanced.
Second, 	the 	eas1ng 	of 	entry 	restrictions 	should 	not 	result
1n 	Increased 	serV1ce 	~efusals. 	Rather, 	increasing 	the 	number 	of
cabs 	will 	llkely 	increase 	the 	probab1lIty 	that 	persons 	bound 	to
oc 	from 	the 	outer 	boroughs 	will 	be 	abl~ 	~o 	obtain 	medallion 	taxi
serVIce.
~hird, 	the 	easing 	of 	entry 	restrictions 	may 	not 	result 	In
greater 	traffIC 	congestion 	and 	decreased 	air 	quality.lOI
Allowing 	more 	"for 	hall" 	taxicabs 	will 	likely 	displace 	some
private 	veh1cles 	and 	gypsy 	cabs. 	Further, 	Since 	emission 	control
stan~arcs appl1cable 	to 	taxicabs 	are 	more 	str1ngent 	than 	those
..
91 	M. 	Frankena 	and 	P. 	Pautler, 	kn 	Economic 	Analysis 	of 	Taxicab
'RegulatIon, 	B~reau of 	SconOffilCS 	Sta:f 	Report 	(Federal 	T~ade
Commlsslcn; 	May 	1984), 	a 	copy 	0: 	WhiCh 	1S 	attached 	for 	your
lnfonrLction) .
10/ 	I:::. 	at 	38-43.

~he 	Honolable 	AndlEw 	Steln
appllcable 	to 	other 	automoblles, 	offsetting 	reductions 	in
aulomotlve 	pollutlon 	may 	be 	reallzed.ll/
C
.J
Bll1 	No. 	700 	would 	authorlze 	the 	TaXl 	and 	Limouslne
Commisslon 	("TLC") 	to 	issue 	addllior.al 	taxlcab 	licenses, 	provlded
that 	the 	adcltional 	llcenses 	are 	nontransferable 	and 	do 	not
exceed 	1800 	ln 	number. 	Insofar 	as 	Bill 	No. 	700 	is 	deslgned 	Lo
increase 	entry 	into 	the 	"for 	hall" 	segment 	of 	the 	taxicab 	market,
we 	applaud 	that 	goal. 	However, 	the 	bill 	llmits 	the 	number 	of 	new
medallions 	and 	is 	encumbered 	by 	unnecessary 	regulatory
requllements.
For 	example, 	prlor 	to 	the 	lssuance 	of 	addltlonal 	licenses,
the 	TLC 	will 	have 	to 	determine 	"that 	the 	public 	convenience,
welfare 	and 	necesslty 	require 	the 	operatlon 	of 	the 	additional
taxlcabs 	• 	."12/ 	Further, 	the 	TLC 	must 	prescribe 	"such
restrictions 	on 	the 	operatlon 	of 	vehlcles 	licensed 	pursuant 	to
this 	section 	as 	the 	commisslon 	may 	deem 	appropriate 	including,
but 	not 	llmited 	to, 	the 	areas 	ln 	which 	and 	the 	times 	during 	which
such 	vehicles 	may 	be 	operated. 	."13/ 	The 	marketplace 	is 	the
truest 	arblter 	of 	publlC 	convenience 	and 	welfare, 	and 	will
allocate 	taxlcab 	resources 	most 	efficiently. 	Unnecessary
regulatory 	requi"ements 	wlll 	forestall 	realizatlon 	of 	the 	publlC
benefits 	otherwise 	aV2llable 	from 	unfettered 	competition 	in
taxicab 	markets. 	A~cordingly, we 	urge 	that 	the 	TLC 	be 	d:rected
to 	lssue 	adcltlonal 	medallions 	without 	imposing 	any 	condltions 	on
their 	use.
. 	Both 	economic 	analysis 	and 	the 	experience 	of 	o~her 	cities
throughout 	the 	country 	strongly 	support 	the 	elimination 	of
restrlctlons 	on 	entry 	into 	th0 	"for 	hell" 	segment 	of 	New 	York
City's 	taxicab 	market. 	Deregc:a~lon, coupled 	with 	the
malntenance 	of 	reaso~able safsty 	a~d 	consumer 	protectio~
requirements, 	would 	yield 	large 	beneflts 	wlth 	no 	significant
adverse 	effects.l4/
11/ 	The 	Draft 	ErS, 	at 	7.11-7.13 	and 	7.19, 	recommends 	varlOUS
possible 	options 	to 	lmprove 	traffic 	flow 	and 	air 	quality.
12/ 	8111 	No. 	700, 	proposed 	§ 	19-504.la.
13/ 	Elll 	No. 	700, 	proposed 	§ 	19-504.1b(ill).
14/ 	We 	believe 	tha~ deregulatlon 	of 	minimurr. 	fares 	as 	well 	as
ellmlnatlon 	of 	entry 	bafrlers 	are 	nec~ssary to 	maxlmi~e consumer
w~l:are. 	The 	bl~l 	does 	not 	ad~ress the 	former 	lssue, 	even 	though
the 	~ayor's :offirrlttse 	on 	~axi 	?e~ula~ory Issues, 	chaired 	by
Richard 	B. 	S~lt~, 	re~om~ended 	t~at 	the 	wedallion 	meter 	fare 	be
converted 	over 	tlme 	:rom 	a 	fixed 	to 	a 	maXlmum 	:are. 	Corrcnittes 	on
~ay.: Regulatory 	Issues, 	"Recomme~~ations" at 	9 	(March 	29,
ISS:). 	There:s 	no 	reason 	to 	9ro~:blt cabs 	:ro~ chats:ng 	lower
rates 	to 	cOffi9Ete 	for 	buslness.

· "
The 	Honorable Andrew 	Stein 	6
We 	hope 	these 	comments 	are 	of 	assistance 	to 	you. 	Please 	do
not 	hesitate 	to 	contact 	us 	if 	you 	have 	any 	questions 	or 	would
like 	further 	information.
Sincerely,
Director
Bureau 	of 	Competition
Enclosure