digital disruption

The lodging indsutry, the lending industry and the taxi industry are all being affected by digital disruption from social media and mobile technologies that connect customers to their peers selling a previously untapped economic market. Here's a story I wrote for the Connecticut Law Tribune about this trend starting up with the Connecticut taxi industry:

An alliance of Connecticut taxicab companies is seeking to shut down two competitive upstarts whose fleet of drivers can be summoned by consumers through smartphone apps.

Fourteen Connecticut-based taxicab and livery companies and the industry's Connecticut trade association filed a federal lawsuit in an attempt to block Uber and Lyft from doing business in the state.

Both Uber and Lyft use online platforms to connect passengers with drivers using their personal, noncommercial vehicles, and both say they are not taxi dispatch services because they don't own vehicles, book rides in advance or employ drivers.

With the filing of Greenwich Taxi v. Uber Technologies, Connecticut joins the ranks of other states with litigation pending against transportation network companies functioning in the name of consumer convenience but in a gray area of consumer protection laws.

Connecticut is one of several states that has warned consumers they might not be covered by the personal automobile insurance policies of drivers associated with Lyft and Uber. The Connecticut Insurance Department noted personal policies commonly exclude claims arising while motorists are driving for hire.

Lyft said in a statement it has a $1 million commercial liability policy, "which is 10 times the $100,000 requirement of Connecticut taxis. Lyft also provides excess uninsured/underinsured motorist and contingent collision coverage for drivers and screens out applicants for any violent crimes, sexual offenses, theft, property damage and felonies."

Lyft also said it screens drivers on the basis of their driving records.

Uber faces at least 13 lawsuits in the U.S. and scrutiny from state insurance agencies in 11 states, according to VentureBeat, a technology-oriented website. For its part, Lyft recently was enjoined from operating by the St. Louis Metropolitan Taxicab Commission.

Mary Alice Moore Leonhardt, newly joined as a principal at Rome McGuigan, in Hartford, said her clients hope Attorney General George Jepsen will intervene in the lawsuit, that the state Department of Consumer Protection will enter a cease-and-desist order against the two ride-sharing companies, and that the state Department of Transportation and the state Department of Motor Vehicles will take regulatory action.

The taxi industry has embraced Connecticut's "safety-driven regulations," but Uber and Lyft aren't abiding by the same safety standards, including criminal background checks on drivers, safety inspections of vehicles and abiding with antidiscrimination laws, Leonhardt said.

Greenwich Taxi and the other plaintiffs are asking for a level playing field, Leonhardt said.

"Taxi and livery companies have invested significant capital and resources to develop systems and infrastructure that ensures regulatory compliance and provides adequate consumer protection," the complaint said.

Leonhardt said she understands the desire of Uber and Lyft's customers to have the convenience of accessing car rides through their smartphones. Many of her taxi cab and livery service clients already have smartphone apps or are in the process of implementing them, she said.

"The industry nationwide recognizes that the capacity to serve clients with a smart app is important," Leonhardt said. "That's just a matter of time."

Uber said in an emailed statement "this baseless lawsuit is just another example of taxi company owners who don't want to compete and who would rather limit consumer choice and driver opportunity." For its part, Lyft said in a statement that it "fills an economic and transportation need for both drivers and passengers in Fairfield County, and our safety requirements far exceed what is required for existing transportation options in the state."

But, said Leonhardt, the ride-sharing services are able to discriminate on the basis of financial status. Not only do riders rate drivers, but drivers rate riders, creating a potential record of discrimination, Leonhardt said. "Defendants' approach ignores virtually all taxi regulations designed to protect customers who suffer from disabilities, who live in less secure neighborhoods, or who simply cannot afford a limousine," the complaint said.

Both services have pricing that surges when demand is high, even though taxi pricing is regulated in Connecticut, the plaintiffs said.

The plaintiffs also claim Uber and Lyft are inducing taxi and livery drivers to sign up with their services in violation of state law and regulations.

The plaintiffs are prosecuting claims of violations of the federal Lanham Act for misrepresentation, the federal Racketeer Influenced and Corrupt Organizations Act, the Connecticut Unfair Trade Practice Act and others.

Cabbies aren't the only profession facing disruption from social media and mobile technologies that connect customers to their peers selling a previously untapped economic market.

The lodging industry is facing competition from Airbnb, a site that allows residential property owners to offer their properties for rent. New York Attorney General Eric Schneiderman is investigating if Airbnb hosts are paying taxes on the services they offer renters and if they're violating state law banning rentals of less than 30 days unless the owner is on the premises.