FTC Staff Comment to the Honorable Brendan Reilly Concerning Chicago Proposed Ordinance O2014-1367 Regarding Transportation Network Providers

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Office of Policy Planning
Bureau of Competition
Bureau of Economics
April 15, 2014
Mr. Brendan Reilly
Alderman – 42nd Ward
City Council
City of Chicago
City Hall – Room 200
121 North LaSalle Street
Chicago, IL 60602
Re: Proposed Ordinance O2014-1367
Dear Alderman Reilly:
The staffs of the Federal Trade Commission’s Office of Policy Planning, Bureau
of Competition, and Bureau of Economics1 appreciate this opportunity to provide
comments to you regarding proposed Ordinance O2014-1367 (“the ordinance”), in
response to your request for an assessment of the ordinance’s possible effects on
competition.
Proposed Ordinance O2014-1367 would amend Title 9 of the Municipal Code of
Chicago by adding a new Chapter 9-115 to establish a regulatory framework that would
provide for the licensing and operation of transportation network providers (“TNPs”),
particularly new software applications (“applications”) that are used by consumers to
arrange for passenger motor vehicle transportation services using personal vehicles. Staff
appreciates that these updates to Title 9 appear designed to facilitate these new forms of
competition that are likely to benefit consumers. We are concerned, however, that certain
provisions of the ordinance may unnecessarily impede competition from these services,
limiting the consumer benefits that such services might otherwise generate. These
provisions are discussed in greater detail, below.
I. 	Interest and Experience of the FTC
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.2 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
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

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countervailing benefits to consumers, and advocates for policies that promote
competition and consumer protection.3
Consumers benefit from market competition in a variety of ways. As the U.S.
Supreme Court has recognized, the benefits of competition not only include lower prices,
but go beyond as well: “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.”4 The competitive process also creates
incentives for producers to be innovative and responsive to consumer preferences with
respect to the design and characteristics of products and services, and the business models
used to deliver them.
In carrying out its mission, the Commission has developed considerable expertise
in analyzing passenger motor vehicle transportation services. FTC staff previously has
submitted a number of advocacy filings related to taxicabs with various local and state
authorities, including recent comments regarding the regulation of new applications for
obtaining passenger vehicle transportation services in the District of Columbia,
Anchorage, Alaska, and Colorado.5 In addition, the FTC has brought antitrust
enforcement actions against two cities relating to taxicab regulation,6 and has issued two
significant reports on taxi regulation.7 The Commission is also knowledgeable in various
aspects of competition and consumer protection that are relevant to new passenger motor
vehicle transportation applications. For example, the Commission has developed
considerable expertise relating to the emergence of new technologies and innovation as a
form of competition.8 Staff has recently updated guidance on how to make effective
disclosures in the online context.9 The Commission has also developed consumer
protection expertise in data security, privacy, and identity theft issues that applications
may raise.10
II. 	The Passenger Motor Vehicle Transportation Marketplace
The marketplace for commercial passenger motor vehicle transportation services
in the United States remained largely unchanged for decades until the arrival of the
smartphone in 2007.11 Historically, commercial services included: cruising taxis that
respond to street hails, taxis that wait for riders at taxi stands, radio-dispatched taxis,
prearranged limousine and sedan-type vehicle service, and jitney-type service. These
services were regulated at the state and local level under a framework that also remained
largely unchanged. Common regulatory features included: licensing requirements, formal
classifications for various vehicle and service types; entry restrictions such as taxi
medallion systems or requirements that new entrants demonstrate a need for service; fare
regulation; prescribed methods of calculating fares and fare information; minimum fares
and prearrangement requirements for limousines and sedans; safety and liability issues;
and handicapped access, universal service, and non-discrimination requirements.
More recently, in response to the introduction of smartphones around 2007, both
incumbent passenger motor vehicle transportation service providers and other

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entrepreneurs have introduced software applications, sometimes also called digital
dispatch services, which allow consumers to arrange and pay for passenger motor vehicle
transportation services in a variety of ways.12 These software applications may make use
of technologies such as mobile smartphone applications, Internet web pages, email
messages, and text messages.
These innovative software applications can spur competition by providing
consumers with new ways to more easily locate, arrange, and pay for passenger motor
vehicle transportation services, as compared to traditional methods such as street hails or
prearrangement by telephone through traditional service dispatchers.13 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.14 Some
applications also utilize the GPS and computing capabilities of smartphones to enable
new methods of fare calculation based on one or more factors, such as distance, time, per
trip fees, real-time demand conditions, additional services, or gratuities, which the
application can then charge to a credit card on file with the application.15 Such
applications may also use third-party credit card processing and electronic receipts, in
lieu of non-electronic payment methods and paper receipts.16
These technologies and new methods appear to be responsive to consumer
demand, and also may promote a more efficient allocation of resources (e.g., vehicles and
drivers) to consumers, help to meet unmet demand for passenger motor vehicle
transportation services, and improve service in traditionally underserved areas.17 They
also may reduce consumers’ transaction costs in arranging and paying for such services.
At the very least, these technologies and methods provide consumers new alternatives to
street hailing or telephoning for service.18
In addition to applications that facilitate the arrangement of passenger motor
vehicle transportation services using commercially licensed vehicles and drivers, another
model has emerged that allows consumers to arrange, and in some instances pay for or
otherwise provide money in connection with, transportation provided by drivers
operating their own personal vehicles. This model is sometimes referred to as being an
application-based variant of traditional “ridesharing” arrangements or as being a “peer-to-
peer” (“P2P”) form of transportation.19
Software applications that facilitate using personal automobiles to provide
transportation services to the public may provide consumers with expanded transportation
options, at potentially lower prices, thereby better satisfying consumer demand, and
potentially increasing competition and promoting a more economically efficient use of
personal vehicles. Staff understands, however, that such applications may raise issues for
policymakers not previously addressed in connection with applications that facilitate the
use of commercial passenger motor vehicle transportation service. While these concerns
may provide grounds for some regulations to protect consumers, as we discuss below, we
encourage the City Council to carefully consider the potential competitive effects of such
regulations as well as the justifications being urged to support them.

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III. 	General Principles for Regulating Evolving Industries
Transportation services facilitated by software applications and provided by
individuals using their personal vehicles appear to be a new phenomenon that lies outside
most existing regulatory schemes. The initial question for regulators, therefore, is
whether there is a public policy justification for regulating them at all, either through
entirely new regulatory mechanisms or expansion of current systems for regulating
commercial passenger motor vehicle transportation services. Unregulated markets can be
adept at accommodating new and innovative forms of competition, whereas traditional
regulatory frameworks may lack the flexibility to do so precisely because they tend to
mirror, and even entrench, the business models that have developed in the past.
Regulatory frameworks, when needed, should be flexible enough to allow new
and innovative forms of competition. Unless regulation is necessary to achieve some
legitimate public interest, markets should be left unfettered to permit competition to
flourish. Consumers benefit from competition between traditional and new products and
services, and from new business models and methods of delivering services. It is
advisable, therefore, that laws and regulations be reviewed and revised periodically to
facilitate and encourage the emergence of new forms of competition, sometimes through
deregulation and other times through the development of new and adaptive regulations.
As with software applications that facilitate commercial passenger motor vehicle
transportation services, any regulations directed at TNP services should focus primarily
on ensuring the safety of customers and drivers, deterring deceptive practices relating to
fares, safety and liability, and other terms of use, and addressing other consumer
protection issues, especially data security and the prevention of identity theft. These
might include provisions that relate to ensuring qualified drivers, safe and clean vehicles,
sufficient liability insurance, transparency of fare information, and compliance with other
applicable laws. Regulations should not in purpose or effect favor one group of
competitors over another or impose unnecessary burdens on applications or drivers that
impede their ability to compete without any justification that benefits the public interest.
Staff notes that the ordinance, in principle, provides a pathway to facilitate and
promote transportation services using personal vehicles that consumers appear to be
demanding and therefore will promote competition. We respectfully suggest, however,
that the Chicago City Council carefully consider the potential direct and indirect impacts
on competition of some of the proposed ordinance’s provisions. Unwarranted restrictions
on competition will undermine the potential benefits of the ordinance and should be
avoided. Any restrictions on competition that are implemented should be no broader than
necessary to address legitimate subjects of regulation, such as safety and consumer
protection, and narrowly crafted to minimize any potential anticompetitive impact.

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IV. 	The Proposed Ordinance
Proposed Ordinance O2014-1367 would amend Title 9 by adding a new Chapter
9-115 to establish a license for transportation network providers. Among other things, the
ordinance would: require that TNPs meet certain qualifications and maintain certain
insurance; set out certain standards for drivers, vehicles, and operation; establish certain
pricing parameters and recordkeeping and reporting requirements; and limit
transportation network service to prearranged service. It would also prohibit pick-ups and
drop-offs in certain airport and convention center areas.
Staff appreciates that by providing for the legal recognition of new software
applications to arrange and pay for passenger motor vehicle transportation services using
personal vehicles, some of the proposed updates to Title 9 are likely to benefit
consumers.20 However, certain provisions, highlighted and analyzed below, may
unnecessarily impede competition in these services without providing any apparent
consumer protection benefits.21
A. 	TNP License Fee
Proposed Chapter 9-115-030 would require an annual fee for a non-transferable
TNP license of $25,000, plus $25 for each affiliated driver. These fees would impose an
additional cost not currently borne by the TNPs. Although the annual fee may not be
substantial enough to inhibit or deter well-established and successful TNPs, it will still
raise their costs of operation, and may prove to be a barrier to the entry or expansion of
new TNPs. If TNPs, especially smaller start-up TNPs having relatively fewer affiliated
drivers, such as a potential local area-only start-up, are forced to incur higher costs than
other business models, such costs may put them at a competitive disadvantage. By
contrast, an annual taxicab affiliation license fee is only $500, plus $15 for each affiliated
licensee, and an annual taxicab two-way dispatch license fee is an additional $500.22 In
either event, these costs may also be passed on to consumers. In addition, because the
TNPs typically seek to operate in many jurisdictions—a characteristic that can make
them attractive to some consumers—the fees could, if replicated elsewhere, collectively
become a substantial barrier to entry and operation, even for more well-established and
successful TNPs.
Staff, therefore, recommends that the Chicago City Council carefully consider the
justification for and effect of these fees on TNPs and competition. If some fee is deemed
necessary to cover the costs of administering a regulatory framework for TNPs or for
some other public purpose, staff recommends that such fees should be no greater than
necessary to cover such costs; staff recommends that any fees should be structured in a
way that avoids unnecessarily inhibiting or deterring new entry or further expansion into
the marketplace.

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B. Pricing
Variation in pricing models has been one of the most innovative and defining
characteristics of software-based applications for arranging transportation services.
Instead of leaving the method of calculating fees to the TNPs, however, proposed
Chapter 9-115-170 would permit TNPs to calculate fees for transportation network
services in only three ways: (1) distance travelled or time elapsed during service, (2) a
flat prearranged fare, or (3) a suggested donation. This specification of fee structures
seems overbroad and likely to restrict one of the most important competitive tools of the
applications. It would also specifically prohibit fares using a combination of distance and
time, which might potentially benefit consumers and competition. More broadly, it locks
in specific fee structures, precluding future evolution of new or different methods of
calculating value for services using personal vehicles.
In addition, proposed Chapter 9-115-170 does not expressly recognize or permit
demand-based pricing. Demand pricing is a mechanism by which resources are allocated
to their most highly valued consumer uses. Demand pricing directly responds to the level
of consumer demand: when demand increases, prices increase and when demand falls,
prices fall. It 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), because it provides
incentives for increased supply to serve increased demand.23 Demand pricing also may
result in lower fares during off-peak times, which may potentially result in an overall
increase in the quantity of service utilized by consumers. Demand based pricing,
therefore, can be more responsive to consumer preferences than fixed pricing models.
Staff recommends that, absent some specific evidence that a particular pricing
model will harm consumers, the ordinance should clearly allow for greater flexibility and
experimentation in structuring fees in order to facilitate innovative forms of pricing that
may benefit consumers.24 To the extent that evidence of such harm is received, any
restriction designed to address that harm should be narrowly crafted to minimize its
anticompetitive impact.25
C. Insurance Requirements
Proposed Chapter 9-115-080 would require each TNP to have commercial general
liability insurance with coverage of at least $1,000,000 per occurrence for bodily injury,
personal injury, and property damage, and also commercial automobile liability insurance
with a combined single limit for bodily injury and property damage of at least $1,000,000
per occurrence. By contrast, current Chapter 9-112-330 only requires taxicab licensees to
have public liability insurance with at least $350,000 combined single limit coverage per
occurrence. Current Chapter 9-114-170 requires that public passenger vehicles, other than
taxicabs, have public liability insurance with combined single limit per occurrence
coverage of at least $100,000 for jitney car service vehicles with up to eight seats, and at
least $350,000 for other vehicles with up to ten seats.

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Requiring TNPs to incur the likely higher costs associated with increased levels of
insurance coverage may put them at a competitive disadvantage versus other business
models.26 This differential in the requirements for insurance coverage might be
appropriate if there is evidence that TNP services involve a higher degree of risk for
consumers. Absent such evidence, however, requiring TNPs to carry greater and likely
more expensive levels of insurance coverage than other service providers will likely harm
competition, increase costs for consumers, and provide no public benefit. If the risks
associated with similar types of passenger motor vehicle service are comparable, then,
from a competition perspective, insurance requirements should also be comparable across
those types of service.
D. Airport and Convention Center Pick-ups and Drop-offs
Proposed Chapter 9-115-160(b) would prohibit transportation network drivers
from picking up or dropping off a passenger at O’Hare International Airport, Midway
International Airport, or McCormick Place convention center, areas where consumers
may frequently demand service. Such a blanket prohibition eliminates even the
possibility that TNP services can compete with other types of passenger transportation
services at these locations. As with the ordinance’s restrictions on pricing and insurance,
absent some specific evidence that the presence of transportation network vehicles in
proximity to these areas will harm consumers, this change should not be adopted. To the
extent that there may be concerns about potential queue problems or congestion issues in
certain areas, staff recommend considering a less restrictive means to deal with these
problems.27
Staff is aware that issues have sometimes arisen regarding the regulation of
commercial passenger motor vehicle transportation services at these kinds of locations, as
in the case of first-in first-out taxicab queues at airport, rail station, or downtown taxicab
stand areas.28 But these problems alone do not appear to support the proposed
restrictions. Generally, there are likely to be more passenger transportation vehicles in
particular areas only if there is demand for such vehicles in those areas, especially if
service has been specifically prearranged by consumers. Staff also notes that similar
restrictions do not appear to be in place for other types of prearranged services (e.g.,
livery service). Also, passenger motor vehicle transportation services can potentially
reduce traffic congestion because increased use of those services can mean reduced use
of automobiles, especially in downtown and other densely populated areas.
Consequently, absent evidence of queue problems or congestion issues unique to TNPs,
unnecessarily restricting the ways that consumers can receive TNP services at these
locations does not appear to be warranted.
E. Records and Data Collection
Proposed Chapter 9-115-180 would require TNPs to maintain operations records
for at least three years and make them available to the city’s commissioner of business
affairs and consumer protection. It would also require them to provide certain customer,
driver, and trip data, including real-time trip data (e.g., driver identity, GPS location data,

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and whether the driver is engaged with a passenger), to the commissioner at such times
and in a format and manner prescribed by regulation.
As a preliminary matter, the City Council might consider whether this information
is needed and, if so, for what purposes. In particular, the City Council should consider if
there is any justification for establishing different data collection requirements for TNPs
and other types of passenger motor vehicle transportation services.29 Data collection and
reporting requirements can impose significant costs on TNPs and the commissioner
should carefully evaluate the costs and benefits of specific requirements, as well as the
availability of less burdensome means of serving any public purpose.
Staff recognizes that the city may want to collect and make available to
consumers certain information relating to safety and availability of service. But staff
cautions against otherwise publicly disclosing or sharing other operational information,
such as real-time trip data, among competitors involved in facilitating or supplying
passenger vehicle transportation services, including TNPs and drivers, and other types of
vehicle operators and vehicle fleets or associations. If shared, this sort of data might
compromise proprietary business strategies and facilitate tacit or explicit collusion among
competing service providers. Such collusion would harm consumers through, for
example, higher prices, decreased output, decreased quality, or reduced innovation.30
Any such information, therefore, should be treated as confidential business information.
F. 	TNP Business Relationships Related to Vehicles
Proposed Chapter 9-115-090(a) would prohibit TNPs from owning transportation
network vehicles, providing financing for the obtaining, leasing, or ownership of such
vehicles, or having a beneficial interest in such vehicles. There does not appear to be any
pro-competitive or pro-consumer rationale to support this sweeping prohibition. To the
contrary, the logical and predictable consequence of it will be to constrain the
development of TNP service to the detriment of competition and consumers.
Although staff is unaware of any TNPs that currently have these types of
relationships relating to personal vehicles, it is conceivable that such business models
might develop in the future (e.g., to facilitate the ability of drivers to get access to
vehicles that can be used in passenger motor vehicle transportation service). Staff,
therefore, strongly cautions against unnecessarily inhibiting new methods or models of
doing business, such as those involving integration or other business relationships
between TNPs, vehicles, and drivers.
G. Vehicle Advertising
Proposed 9-115-120 would prohibit transportation network vehicles from
displaying commercial advertisements on either the exterior or interior of the vehicle. As
with the blanket prohibition on various kinds of integrative relationships between TNPs
and vehicles, there does not appear to be any pro-competitive or pro-consumer rationale
to support this sweeping prohibition. To the contrary, the logical and predictable

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consequence of it will be to limit the sources of income to TNPs and TNP drivers and
constrain the development of TNPs to the detriment of competition and consumers. Staff
notes that advertising is presently permitted for taxis and charter-sightseeing vehicles,
subject to approval by the commissioner based on certain criteria and a one-year permit
fee, under Chapters 9-112-410 and 9-114-330. Staff, therefore, cautions against
unnecessarily inhibiting new methods or models of doing business, such as those
involving external advertising (e.g., magnetic signage or other exterior advertising) or
interior advertising (e.g., interior signage or audio-visual equipment). Any restrictions on
advertising should be narrowly drawn.31
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 policy
in the passenger motor vehicle transportation marketplace.
Respectfully submitted,
Andrew I. Gavil, Director
Office of Policy Planning
Deborah L. Feinstein, Director
Bureau of Competition
Martin S. Gaynor, 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, and Bureau of Economics. The letter does not necessarily
represent the views of the Federal Trade Commission (“FTC” or “Commission”) or of any
individual Commissioner. The Commission has, however, voted to authorize staff to submit these
comments.
2 Federal Trade Commission Act, 15 U.S.C. § 45.
3 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).
4 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).
5 FTC Staff Comments Before the District of Columbia Taxicab Commission Regarding
Second Proposed Rulemakings Regarding Chs. 12, 14, and 16 of Title 31 (June 7, 2013) (“D.C.
Letter”), available at http://www.ftc.gov/policy/policy-actions/advocacy-filings/2013/06/ftc-staff-
comments-district-columbia-taxicab; FTC Staff Comments to the Honorable Debbie Ossiander
Concerning AO NO. 2013-36 Regarding the Regulatory Framework for the Licensing and
Permitting of Taxicabs, Limousines, and Other Vehicles for Hire in Anchorage, Alaska (Apr. 19,
2013), available at http://www.ftc.gov/policy/policy-actions/advocacy-filings/2013/04/ftc-staff-
comment-anchorage-assembly-member-debbie; FTC Staff Comments Before the Colorado Public
Utilities Commission In The Matter of The Proposed Rules Regulating Transportation By Motor
Vehicle, 4 Code of Colorado Regulations 723-6 (Mar. 6, 2013) (“Colorado Letter”), available at
http://www.ftc.gov/policy/policy-actions/advocacy-filings/2013/03/ftc-staff-comment-colorado-
public-utilities.
6 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
ANNUAL REPORT 5 (1985), available at http://www.ftc.gov/reports/annual-report-1985.
7 ORGANISATION FOR ECONOMIC CO -OPERATION AND DEVELOPMENT (“OECD”),
DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS, COMPETITION COMMITTEE
W ORKING P ARTY NO . 2 ON COMPETITION AND R EGULATION , T AXI SERVICES
REGULATION AND COMPETITION 199-210 (Sept. 11, 2008) (submission of the United States),
available at http://www.oecd.org/regreform/sectors/41472612.pdf; M ARK W. FRANKENA &
PAUL A. P AUTLER, AN E CONOMIC ANALYSIS OF T AXICAB REGULATION (1984) (FTC
Bureau of Economics Staff Report), available at http://www.ftc.gov/sites/default/files/
documents/reports/economic-analysis-taxicab-regulation/233832.pdf.
8 See generally U.S. DEP’T OF J USTICE & FTC, ANTITRUST ENFORCEMENT AND
INTELLECTUAL P ROPERTY RIGHTS: PROMOTING INNOVATION AND C OMPETITION (2007),

11
available at http://www.ftc.gov/reports/antitrust-enforcement-intellectual-property-rights-
promoting-innovation-competition-report; FTC, T O PROMOTE INNOVATION: THE PROPER
BALANCE OF COMPETITION AND P ATENT LAW AND POL’Y (2003), available at
http://www.ftc.gov/sites/default/files/documents/reports/promote-innovation-proper-balance-
competition-and-patent-law-and-policy/innovationrpt.pdf; FTC STAFF, ANTICIPATING T HE
21st CENTURY: COMPETITION POL’Y IN THE NEW HIGH -T ECH , GLOBAL M ARKETPLACE
(1996), available at http://www.ftc.gov/system/files/documents/reports/anticipating-21st-century-
competition-policy-new-high-tech-global-marketplace/gc v1.pdf; and FTC STAFF,
ANTICIPATING THE 21 st CENTURY: CONSUMER PROTECTION POL’Y IN THE NEW HIGH -
T ECH , GLOBAL M ARKETPLACE (1996), available at http://www.ftc.gov/system/files/
documents/reports/anticipating-21st-century-competition-policy-new-high-tech-global-
marketplace/gc v2.pdf.
9 	FTC STAFF, . COM DISCLOSURES: HOW TO M AKE EFFECTIVE DISCLOSURES IN
DIGITAL ADVERTISING (2013), available at http://ftc.gov/os/2013/03/130312
dotcomdisclosures.pdf.
10 	See FTC STAFF, M OBILE PRIVACY DISCLOSURES: BUILDING T RUST T HROUGH
T RANSPARENCY (2013), available at http://www.ftc.gov/os/2013/02/13020
1mobileprivacyreport.pdf.
11 OECD Submission, supra note 7, at 200 (“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.”).
12 See generally Lauren Goode, Worth It? An App to Get a Cab, WALL STREET J., June 17,
2011, available at http://blogs.wsj.com/digits/2011/06/17/worth-it-an-app-to-get-a-cab/.
13 See generally id.
14 See generally id.
15 See generally 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); 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).
16 See generally Goode, supra note 12.
17 See generally NEW YORK CITY T AXI & LIMOUSINE COMM ’ N , PRESENTATION , E-
HAIL PILOT PROGRAM (Dec. 31, 2013) (second quarter assessment of the city’s e-hail pilot
program for regulated yellow taxicabs), available at
http://www.nyc.gov/html/tlc/downloads/pdf/ehail q2 report final.pdf.
18 See generally id.at 8-9.
19 This model is one example of the larger recent phenomena of the still developing
“sharing economy” in which individuals may exchange or “share” goods and services using

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Internet-enabled communications technologies in ways that were previously impractical. Other
examples include: car-sharing, parking space rentals, boat rentals, rentals of personal homes and
apartments, dog kennel services, and the rental of personal goods. See generally ECONOMIST , All
eyes on the sharing economy, Mar. 9, 2013 (Technology Quarterly: Q1 2013), available at
http://www.economist.com/news/technology-quarterly/21572914-collaborative-consumption-
technology-makes-it-easier-people-rent-items.
20 Proposed 9-115-090(c) states that “No vehicle licensed as a taxi or public transportation
vehicle in any jurisdiction shall be operated as a transportation network vehicle.”
21 In addition to the provisions discussed in the body of this letter, staff also notes that under
proposed amended Chapter 3-46-050 A.-B., TNPs, transportation network drivers, and
transportation network vehicles would not be exempt from Chicago’s Motor Vehicle Lessor Tax
and Personal Property Lease Transaction Tax, as are, respectively, other lessors or lessees of a
ground transportation vehicle and persons leasing a ground transportation vehicle from a license
holder. This differential tax treatment may put TNPs at a competitive disadvantage, versus other
vehicle types. See generally infra note 26 and related text.
Likewise, under proposed amended Chapter 3-46-065 C., transportation network vehicle
owners could not claim a tax credit for providing service to or from designated underserved areas,
as can other ground transportation vehicle license holders. Such an exclusion may put TNPs at a
competitive disadvantage in serving underserved areas. See generally id. Such an exclusion could
also reduce the economic incentives of TNPs to provide service in underserved areas, generally.
As noted above, applications may promote passenger motor vehicle transportation service to
traditionally underserved areas. See NEW YORK CITY T AXI & LIMOUSINE COMM ’ N , supra
note 17, at 10 (“E-Hail Apps are having the greatest effect on passengers and drivers in places
that tend to be underserved by taxis.”). Staff, therefore, recommends that the Chicago City
Council carefully consider the implications of excluding TNPs from receiving a tax credit for the
provision of passenger motor vehicle transportation service in underserved areas.
22 Municipal Code of Chicago Ch. 9-112-340(l) and Ch. 9-112-550(b). In addition, a one-
year taxicab medallion license issuance or renewal fee for taxicabs that are not wheelchair
accessible is $600 and a one-year taxicab medallion license issuance or renewal fee for
wheelchair accessible taxicabs is $500. Id. at Ch. 9-112-150(a)(i)-(ii). The annual fees for
passenger vehicles other than taxicabs are $500 for a livery vehicle; $500 for a charter/sightseeing
vehicle; $500 for a medical earner; and $250 for jitney car service. Id. at Ch. 9-114-070.
23 See generally ROBERT H. FRANK , M ICROECONOMICS AND BEHAVIOR 37 (8th ed.
2010).
24 Pricing practices should be truthful and non-deceptive, in order for the passenger motor
vehicle transportation marketplace to function efficiently. See generally D.C. Letter, supra note 5,
at 7-8 & nn.28-29 and Colorado Letter, supra note 5, at 4 & nn.17-18.
25 For example, if there is evidence that consumers do not understand or are confused by
alternative methods of calculating payments, the City Council could consider requiring better
disclosures in lieu of fixing and limiting the range of permissible payment methods.
26 See generally Steven C. Salop & David T. Scheffman, Cost-Raising Strategies, 36 J.
INDUS. E CON . 19 (1987); Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive

13
Exclusion: Raising Rivals’ Costs to Achieve Power over Price, 96 YALE L. J. 209 (1986); Steven
C. Salop & David T. Scheffman, Raising Rivals’ Costs, 73 AM. ECON . REV . 267 (1983).
27 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. OECD Submission, supra note 7, at 204-05; Staff Report,
supra note 7, at 1, 50-51, 123-24, 156.
28 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. OECD Submission, supra note 7, at 200; Staff Report, supra note 7, at 1, 50-51, 123-24,
156.
29 Compare Proposed Chapter 9-115-180, with current Municipal Code of Chicago Chapter
9-112-210 (“Duty to maintain real time records as to a chauffeur operating a taxicab”) (requiring
licensees to maintain real-time chauffeur identity data, and produce to the commissioner upon
request information and data regarding which chauffer is operating a particular taxicab on any
given date and time, and that taxicab medallion holders implement processes to enable the
commissioner to access real-time data on chauffer identity and the taxicab’s location).
30 See generally D.C. Letter, supra note 5, at 6-7. See also FTC Comments Before the
Environmental Protection Agency Concerning Proposed Confidentiality Determinations for Data
Required Under the Mandatory Greenhouse Gas Reporting Rule and Proposed Amendment to
Special Rules Governing Certain Information Obtained Under the Clean Air Act (Sept. 30, 2010),
available at http://www.ftc.gov/policy/policy-actions/advocacy-filings/2010/09/ftc-comment-
environmental-protection-agency (discussing a proposed EPA rule concerning the confidentiality
of data submitted under EPA’s Greenhouse Gas Reporting Rule).
31 Because Proposed 9-115-120 would implement certain restrictions on commercial
speech, it may also raise First Amendment issues. See generally Central Hudson Gas & Elec.
Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557 (1980) (articulating four-part test for
evaluating whether government restrictions on commercial speech are constitutional).