FTC Staff Comment Before the Colorado Public Utilities Commission Concerning Proposed Rulemaking on Passenger Vehicle Transportation Services

Office of Policy Planning
Bureau of Competition
Bureau of Consumer Protection
Bureau of Economics
March 6, 2013
State of Colorado
Public Utilities Commission
1560 Broadway Suite 250
Denver, CO 80202
Re: Docket No. 13R-0009TR
The staffs of the Federal Trade Commission’s Office of Policy Planning, Bureau
of Competition, Bureau of Consumer Protection, and Bureau of Economics 1 appreciate
this opportunity to provide comments to the Colorado Public Utilities Commission
(“CPUC”) on three proposed changes to the Code of Colorado Regulations, contained in
its Notice of Proposed Rulemaking In The Matter of The Proposed Rules Regulating
Transportation By Motor Vehicle, 4 Code of Colorado Regulations 723-6.2 Proposed
Rule 6001(ff) would equate the advertisement or offering of the provision of
transportation with being a “motor carrier.” Proposed Rule 6301(a) would require charter
contract transportation, which includes transportation provided by luxury limousines,
including stretched limousines and executive cars and vans, to operate using a specific
fixed price. Proposed Rule 6309(d) would prohibit luxury limousines from stationing
within 200 feet of a hotel, motel, restaurant, bar, taxicab stand, or airport passenger
pickup point without the service having been prearranged and the completed charter order
being in the vehicle.
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 (“applications”) that allow consumers
to arrange and pay for services in new ways that they might prefer, and thus harm
consumers. In evaluating claims that the practices to be prohibited impose a genuine
threat to consumer welfare, we recommend that CPUC be guided by the principle that
any restriction on competition designed to address such potential harm should be
narrowly crafted to minimize its anticompetitive impact.
Generally, staff recommends that a regulatory framework for passenger vehicle
transportation should allow for flexibility and adaptation in response to new and
innovative methods of competition, while still maintaining appropriate consumer
protections. Given the recent introduction of new applications for arranging and paying
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

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for passenger vehicle transportation services, CPUC may wish to consider whether there
are ways to clarify or update existing rules on passenger vehicle transportation service to
allow competition to flourish, while still maintaining appropriate, reasonably tailored
consumer protections.
I. 	Interest and Experience of the Federal Trade Commission
The FTC is an independent federal agency that enforces laws prohibiting unfair
methods of competition and unfair and deceptive acts or practices in or affecting
commerce.3 The Commission has wide-ranging responsibilities concerning nearly all
segments of the economy. Pursuant to this responsibility, the Commission seeks to
identify business practices and regulations that impede competition without offering
countervailing benefits to consumers.4
Competition and consumer protection enforcement naturally complement and
mutually reinforce each other, to the benefit of consumers. Consumers benefit from
market competition. The U.S. Supreme Court has recognized that the benefits of
competition go beyond lower prices: “The assumption that competition is the best method
of allocating resources in a free market recognizes that all elements of a bargain - quality,
service, safety, and durability - and not just the immediate cost, are favorably affected by
the free opportunity to select among alternative offers.”5 At the same time, consumer
protections promote informed consumer decision-making by requiring sellers to make
truthful and non-deceptive representations about their offerings. In other words,
competition pressures producers to be innovative and responsive to consumer preferences
with respect to price, quality, and other options, while consumer protection policies
reinforce competition by facilitating informed consumer choices and prohibiting firms
from engaging in unfair or deceptive acts or practices.
In carrying out its mission, the Commission has developed considerable expertise
in analyzing issues relating to passenger vehicle service markets. FTC staff previously
has submitted a number of advocacy filings related to taxicabs with various local and
state authorities.6 The FTC has also brought enforcement actions against two cities
relating to taxicab regulation.7 Another major contribution in this area is an FTC staff
report on taxi regulation.8 The report’s conclusions are still generally applicable today.9
II. 	The Passenger Vehicle Transportation Marketplace
Until recently, the passenger vehicle transportation marketplace in the United
States remained largely unchanged since at least the early 1980s.10 However, in response
to the introduction of smartphones around 2007, both incumbent passenger vehicle
transportation service providers and other entrepreneurs have introduced new software
applications that allow consumers to arrange and pay for passenger vehicle transportation
service.11 These software applications, also sometimes called digital dispatch services,
make use of technologies such as mobile smartphone applications, Internet web pages,
email messages, and text messages.

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These applications represent an innovative form of competition that may enable
consumers to more easily arrange and pay for passenger vehicle transportations services,
compared to traditional methods such as street hails or prearrangement by telephone
through traditional service dispatchers.12 For example, some applications use the Global
Positioning System (“GPS”) technology incorporated into smartphones to enable
consumers to locate nearby vehicles and track their arrival on an electronic map, thus
facilitating matching between customers and service.13 Some applications also utilize the
GPS and computing capabilities of smartphones to enable new fare calculation methods
based on one or more factors such as distance, time, per trip fees, demand, additional
services, or gratuities, which the application can then charge to a credit card.14 These
technologies and methods may promote a more efficient allocation of resources (e.g.,
vehicles and drivers) to consumers seeking passenger vehicle transportation services.
These technologies and methods may also raise novel consumer protection issues, for
example, relating to consumers’ understanding of price information communicated via an
application. Other potential areas of concern may include the collection, use, and
retention of consumer trip data and the collection, use, and retention of consumer credit
card data.
III. 	A Regulatory Framework Should be Responsive to New Methods of
Competition
Staff recommends that a regulatory framework for passenger vehicle
transportation should allow for flexibility and adaptation in response to new and
innovative methods of competition, while still maintaining appropriate consumer
protections. CPUC also should proceed with caution in responding to calls for change
that may have the effect of impairing new forms or methods of competition that are
desirable to consumers. Regulation of vehicle transportation should focus primarily on
ensuring qualified drivers, safe and clean vehicles, sufficient liability insurance,
transparency of fare information, and compliance with other applicable laws.15
Regulation of new computer and phone-based applications should focus primarily on
ensuring the safety of customers and drivers, deterring deceptive pricing practices, and
addressing other consumer protection issues.16
In general, competition should only be restricted when necessary to achieve some
countervailing procompetitive virtue or other public benefit such as protecting the public
from significant harm. This is because consumers benefit from competition among
passenger vehicle transportation services, both new and traditional. In the case of
passenger vehicle transportation services, competition takes place on a variety of
dimensions, including price, availability, timeliness, convenience, quality, vehicle type,
and other amenities. A regulatory framework should not restrict the introduction or use
of new types of applications, or novel features they provide, absent some evidence of
public harm. Generally, a regulatory framework should promote innovation and
experimentation that benefit consumers. If CPUC receives evidence of harm from a
particular act or practice, a restriction on competition should be narrowly crafted to
minimize its anticompetitive impact.

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Truthful, non-deceptive information about passenger vehicle transportation
services is necessary for the passenger vehicle transportation marketplace to function
efficiently.17 Software applications may provide a number of benefits to consumers,
including helping them to compare passenger vehicle transportation services, but they
also have the potential to confuse or mislead consumers if, for example, they fail to
adequately disclose how fares are calculated or employ “drip pricing” practices.18
Nevertheless, to promote competition and consumer choice, CPUC should consider less
restrictive alternatives to what may be de facto bans on new methods of competition
facilitated by software applications.
IV. 	Notice of Proposed Rulemaking
The Notice of Proposed Rulemaking contains three proposed amendments to the
Code of Colorado Regulations that may unnecessarily restrict competition in the
passenger vehicle transportation marketplace.
A. Proposed Rule 6001(ff)
Proposed Rule 6001(ff) would amend the definition of a “motor carrier,” so that
“Without limitation, providing transportation includes advertising or otherwise offering
to provide transportation.” According to the Notice of Proposed Rulemaking, this
amendment would equate the mere advertisement or offering of providing transportation
with being a motor carrier that provides transportation in intrastate commerce.19 Such an
expansive definition seems overbroad. Merely communicating an advertisement or offer
to provide transportation is not the functional equivalent of actually providing
transportation service. This change would create an unwarranted barrier to the entry and
operation of applications that are not also motor carriers, and may inhibit, impair or
preclude new and innovative ways in which independent applications can affiliate with
transportation service providers.
To the extent that CPUC finds that software applications may harm consumers, it
should craft any necessary regulations to minimize their anticompetitive impact.
Otherwise, CPUC should allow for flexibility and experimentation in the ways that
applications and motor carriers can affiliate with each other.
B. Proposed Rule 6301(a)
Proposed Rule 6301(a) would require that charter contract transportation, which
includes transportation services provided by luxury limousines, including stretched
limousines and executive cars and vans, be based on a “specific fixed price.”20 This
change seems overbroad, as it would effectively preclude variable pricing for charter
transportation, including new types of application-based demand pricing, which might
potentially benefit consumers and competition. Demand pricing can be an efficient way
to allocate resources (e.g., vehicles and drivers) to consumers, particularly during times
of peak demand (e.g., during particular times of day, periods of traffic congestion, around
the time of special events). That is to say, price increases signal increased consumer

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demand for goods and services, while price declines can signal the opposite.21 Demand-
based pricing, therefore, can be more responsive to consumer preferences than some
traditional flat-rate models.
FTC staff believes that, absent some specific compelling evidence that pricing
models other than a “specific fixed price” will harm consumers, this change should not be
adopted. To the extent that CPUC does receive evidence of such harm, any restriction
designed to address that harm should be narrowly crafted to minimize its anticompetitive
impact. For example, CPUC may wish to consider requiring applications to disclose
certain price information to consumers before purchase,22 expressly allowing or requiring
applications to provide an electronic receipt to customers for verification purposes, or
requiring applications to maintain a trip log or manifest for verification purposes.23
Otherwise, CPUC should allow for flexibility and experimentation in charter contract
pricing in order to facilitate innovative forms of pricing that may benefit consumers.
C. Proposed Rule 6309(d)
Proposed Rule 6309(d) would prohibit luxury limousines from stationing within
200 feet of a hotel, motel, restaurant, bar, taxicab stand, or airport passenger pickup point
without the service having been prearranged and the completed charter order in the
vehicle. This proposed change also seems overbroad, as it would likely impede the
ability of consumers to quickly obtain luxury limousine service using an application in
many cases, particularly in areas having high concentrations of covered locations, such as
downtown areas and other “urban village” areas that have a mixture of residential areas
and businesses close to each other. This change would appear to require that luxury
limousines depart such areas after dropping off passengers and before completing another
order.
FTC staff believes that, absent some specific compelling evidence that the
presence of luxury limousine vehicles in proximity to typical passenger pick-up areas will
harm consumers, this change should not be adopted. To the extent that CPUC may be
concerned about potential queue problems or congestion issues in certain areas, it could
consider using a less restrictive means to deal with these problems. 24 Staff is aware that
special issues have sometime arisen regarding the regulation of passenger vehicle
transportation services, as in the case of first-in first-out taxicab queues at airport, rail
station, or downtown taxicab stand areas.25 But these problems alone do not support this
proposed broad restriction. Generally, there are likely to be more passenger
transportation vehicles stationing in particular areas only if there is demand for such
vehicles in those areas. Also, passenger vehicle services can potentially reduce traffic
congestion because increased use of those services can mean reduced use of private
automobiles, especially in downtown and other densely populated areas. Consequently,
absent evidence of queue problems or congestion issues, CPUC should avoid
unnecessarily restricting the ways that consumers can be picked up by passenger vehicle
transportation services.

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V. 	Conclusion
FTC staff appreciates this opportunity to provide views in regard to this matter
and would be happy to address any questions you may have regarding competition and
consumer protection policy in the passenger vehicle transportation marketplace.
Respectfully submitted,
Andrew I. Gavil, Director
Office of Policy Planning
Richard A. Feinstein, Director
Bureau of Competition
Charles A. Harwood, Acting Director
Bureau of Consumer Protection
Howard Shelanski, Director
Bureau of Economics

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1 This staff letter expresses the views of the Federal Trade Commission’s Office of Policy
Planning, Bureau of Competition, Bureau of Consumer Protection, and Bureau of Economics.
The letter does not necessarily represent the views of the Federal Trade Commission or of any
individual Commissioner. The Commission, however, has voted to authorize staff to submit
these comments.
2 CPUC Docket No. 13R-0009TR (Open Date Jan. 7, 2013), available at
https://www.dora.state.co.us/pls/efi/EFI.Show_Docket?p_session_id=&p_docket_id=13R-
0009TR.
3 Federal Trade Commission Act, 15 U.S.C. § 45.
4 Specific statutory authority for the FTC’s competition advocacy program is found
in Sections 6(a) and (f) of the FTC Act, under which Congress authorized the FTC “[t]o gather
and compile information concerning, and to investigate from time to time the organization,
business, conduct, practices, and management of any person, partnership, or corporation engaged
in or whose business affects commerce,” and “[t]o make public from time to time such portions
of the information obtained by it hereunder as are in the public interest. . . . ” 15 U.S.C. § 46(a),
(f).
5 Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978); accord, FTC v.
Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 423 (1990).
6 E.g., FTC Staff Comments Before the Colorado Public Utilities Commission Concerning
Application of Union Taxi Cooperative for Permanent Authority to Operate a Taxi Service (Nov.
3, 2008), available at http://www.ftc.gov/os/2008/11/V090000cotaxis.pdf.
7 The FTC sued the cities of New Orleans and Minneapolis in 1984, charging both
cities with unfair competition by combining with taxicab operators to impose regulations that
limited the number of taxicab licenses, increased fares, and eliminated competition in violation of
the federal antitrust laws. The complaint against Minneapolis was withdrawn after the city
revised its ordinance to permit more competition. The complaint against New Orleans also was
withdrawn after the state authorized the conduct in question by a new law. See generally FTC,
1985 A NNUAL REPORT 5 (1985), available at http://www.ftc.gov/os/annualreports/ar1985.pdf.
8 M ARK W. FRANKENA & P AUL A. P AUTLER, AN E CONOMIC ANALYSIS OF
T AXICAB REGULATION (1984) (FTC Bureau of Economics Staff Report), available at
http://www.ftc.gov/be/econrpt/233832.pdf (“Staff Report”).
9 OECD, Directorate for Financial and Enterprise Affairs, Competition Committee
Working Party No. 2 on Competition and Regulation, Taxi Services Regulation and Competition
– United States (Oct. 15, 2007), available at http://www.ftc.gov/bc/international/docs/ustaxis.pdf.
10 Id. at 2 (“As of 2007, the general description of the taxicab industry and taxicab
regulation in the United States remains much as it was when Frankena and Pautler described it in
1984. That is, nothing dramatic has happened to alter the U.S. industry in the interim.”).
11 See generally Lauren Goode, Worth It? An App to Get a Cab, WALL S TREET J. (June
17, 2011), available at http://blogs.wsj.com/digits/2011/06/17/worth-it-an-app-to-get-a-cab/.

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12 See generally id.
13 See generally id.
14 See generally Brian X. Chen, Uber, an App That Summons a Car, Plans a Cheaper
Service Using Hybrids, N.Y. T IMES , July 1, 2012, available at http://www.nytimes.com
(discussing charging by time, distance, consumer demand, and gratuities); Michael B. Farrell,
Taxi App Hailo to Expand Service, BOSTON GLOBE , Feb. 5, 2013, available at
http://www.bostonglobe.com (discussing booking fees, service fees, and gratuities).
15 See generally Staff Report, supra note 8, at 1-2.
16 For example, under the Washington, D.C. Public Vehicle-for-Hire Innovation
Amendment Act of 2012 (D.C. Council B19-0892) (adopted Jan. 18, 2013) (amending D.C.
Official Code § 50-329.02), “A digital dispatch service shall be exempt from regulation by the
[District of Columbia Taxicab] Commission, other than rules and regulations that are necessary
for the safety of customers and drivers or consumer protection.” See also generally Press
Release, California Public Utilities Commission, CPUC Enters Into Operating Agreement With
Uber (Jan. 31, 2013), available at http://www.cpuc.ca.gov/NR/rdonlyres/F013B3B9-ED4E-4554-
9C34-E468C9DAED88/0/CPUCEntersIntoOperatingAgreementwithUber.pdf (describing an
interim agreement allowing Uber Technologies, Inc. to operate pursuant to certain safety
requirements, while a California Public Utilities Commission rulemaking on innovations in
passenger vehicle transportation services is underway). The details of this agreement are
contained in Term Sheet for Settlement Between the Safety and Enforcement Division of the
California Public Utilities Commission and Uber Technologies, Inc. Re Case PSG-3018, Citation
F-5195 (Jan. 2013) (available via the California Public Utilities Commission).
17 From the perspective of consumer protection, information relating to the provision of
passenger transportation vehicle services communicated to consumers should be evaluated on a
totality of the circumstances approach. FTC Policy Statement on Deception, Appended to
Cliffdale Assoc., Inc., 103 F.T.C. 110, 174 (1984), available at
http://www.ftc.gov/bcp/policystmt/ad-decept.htm. The FTC’s approach to deception consists of a
three-part test. First, there must be a representation, omission, or practice that is likely to mislead
the consumer. Practices that have been found to be misleading or deceptive in specific cases
include false written representations, misleading price claims, use of bait and switch techniques,
and failure to perform promised services. Second, the practice is examined from the perspective
of a consumer acting reasonably in the circumstances. In evaluating a particular practice, the
Commission considers the totality of the practice in determining how reasonable consumers are
likely to respond. If the representation or practice affects or is directed primarily to a particular
group, the FTC examines reasonableness from the perspective of that group. Third, the
representation, omission, or practice must be a "material" one. The basic question is whether the
act or practice is likely to affect the consumer's conduct or decision with regard to a product or
service. If so, the practice is material, and consumer injury is likely, because consumers are
likely to have chosen differently but for the deception. In many instances, materiality, and hence
injury, can be presumed from the nature of the practice. In other instances, evidence of
materiality may be necessary. Thus, the FTC will find deception if there is a representation,
omission or practice that is likely to mislead the consumer acting reasonably in the circumstances,
to the consumer's detriment.

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18 Drip pricing is a pricing technique whereby firms advertise only part of a product’s price
and reveal other charges later as the customer goes through the buying process. The additional
charges can be mandatory charges, such as hotel resort fees, or fees for optional upgrades and
add-ons. Drip pricing is used by many types of firms, including internet sellers, automobile
dealers, financial institutions, and rental car companies. 	See generally Fed. Trade Comm’n
Conference on the Economics of Drip Pricing (May 21, 2012),
available at http://www.ftc.gov/be/workshops/drippricing/index.shtml.
19 In addition, if Proposed Rule 6001(ff) were adopted, a software application would,
apparently, then also be covered by Proposed Rule 6010(a), (c) (concerning motor carrier
authority and permit applications and motor carrier use of trade names). CPUC may wish to
consider whether, in this scenario, a software application might be unnecessarily restricted from
using certain words, due to it being subjected to existing traditional motor carrier classifications.
For example, CPUC may wish to consider whether, pursuant to Proposed Rule 6010(a), (c), a
software application covered as a motor carrier might be unnecessarily restricted from using the
phrase “limousine taxi” to describe a luxury limousine service. Staff further recommends that
CPUC also more generally evaluate the use of such terms regarding motor carrier service based
on a totality of the circumstances approach, as described above, and consider whether there is
evidence of consumer confusion regarding different types of motor carrier services that warrants
adopting Proposed Rule 6010(a), (c). CPUC may also wish to consider whether there are specific
ways to clarify or update existing motor carrier classifications, so as to avoid unnecessarily
inhibiting the use of applications that might facilitate passenger vehicle transportation service
across different traditional classifications.
Because Proposed Rule 6010(a), (c) would implement certain restrictions on commercial
speech, it may also raise First Amendment issues. See generally Central Hudson Gas & Elec.
Corp. v. Public Service Comm’n of New York, 447 U.S. 557 (1980) (articulating four-part test
for evaluating whether government restrictions on commercial speech are constitutional).
20 4 C OLO . CODE REGS . 723-6 § 6001(ee) (“‘Luxury limousine service’ means a
specialized, luxurious transportation service provided on a prearranged, charter basis as defined in
rule 6301(a).”); § 6001(dd) (“‘Luxury limousine’ means a motor vehicle, for compensation to
transport passengers in luxury limousine service.”); § 6308(a) (I)-(III) (Luxury Limousine
Categories).
21 	See generally ROBERT H. F RANK , MICROECONOMICS AND BEHAVIOR 37 (2010).
22 See generally, e.g., 4 COLO . CODE REGS . 723-6 § 6252 (requiring taxicabs to post
certain information, including certain fare information).
23 See generally, e.g., 4 COLO . CODE REGS . 723-6 § 6256 (requiring taxicab carriers to
maintain certain data for each trip, for a minimum of one year from the date a customer requested
taxicab service).
24 Consumers appear to be better off when regulators pursue alternatives for such locations
that are less restrictive, such as redesigning taxicab stands, increasing taxicab line user fees, or
entering into contracts with operators. Staff Report, supra note 8, at 1, 50-51, 123-24, 156;
OECD, supra note 9, at 6-7.

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25 It appears that in some cases first-in first-out taxicab queues have inhibited price
competition, that drivers sometimes bickered over their places in line as queues of waiting cabs
lengthened, and that drivers also sometimes refused service to passengers wanting only a short
trip. Staff Report, supra note 8, at 1, 50-51, 123-24, 156; OECD, supra note 9, at 2.