FTC Staff Comment Before the San Francisco Police Commission Concerning the Issuance of Additional Taxicab Medallions

STATEMENT 	OF
THE 	FEDERAL 	TRADE 	COMMISSION 	STA??
BEFORE 	THE
SAN 	FRANCISCO 	POLICE 	COMMISSIOK
IN 	CONNECTION 	WITH
TAXICAB 	HEARINGS 	HELD 	IN 	SAN 	FRANC:SCO
ON
DECEMBER 	11, 	1986

1
We 	welcome 	this 	opportunity 	to 	comment 	on 	the 	issuance 	of
additional 	taxicab 	medallions 	in 	the 	City 	of 	San 	Francisco. l
Taxicab 	regulation 	is 	often 	viewed 	as 	a 	matter 	of 	state 	or 	local
concern. 	However, 	taxi 	services 	are 	frequently 	~5ed by 	travelers
from 	out 	of 	state, 	whether 	traveling 	for 	business 	or 	pleasure,
and 	the 	operation 	of 	the 	industry 	is 	therefore 	a 	proper 	matter
for 	federal 	concern 	as 	well. 	The 	Federal 	Trade 	C~mmission staff
has 	long 	had 	an 	interest 	in 	the 	effects 	of 	taxicej 	regulation
upon 	competition 	and 	consumers. 	We 	have 	corne 	to 	:he 	conclusion
that 	regulating 	the 	taxicab 	industry 	to 	restrict 	:he 	number 	of
cabs 	generally 	hurts 	rather 	than 	helps 	consumers 	and 	competition,
and 	especially 	harms 	certain 	disadvantaged 	groups 	that 	rely 	on
taxicab 	service.
In 	1984, 	the 	Commission's 	Bureau 	of 	Economics 	published 	a
study 	of 	the 	problem 	entitled 	"An 	Economic 	Analysis 	of 	Taxicab
Reguldtions." 	Based 	on 	careful 	study 	of 	regulati~ns throughout
the 	country, 	the 	report 	concludes 	that 	there 	is 	~~ economic
rationale 	for 	the 	strict 	entry 	restraints 	and 	prc~ibitions of
fare 	competition 	that 	are 	common 	in 	many 	communi:ies. 	On 	the
other 	hand, 	the 	report 	does 	not 	challenge 	state 	end 	local
regulations 	that 	deal 	with 	safety 	and 	vehicle 	qUelity
requirements, 	fare 	posting, 	and 	other 	similar 	ma:ters.
These 	findings 	are 	not 	unique. 	Researchers 	working 	for 	the
This 	statement 	represents 	the 	views 	of 	the 	Sen 	Fran~isco
Regional 	Office 	and 	the 	Bureaus 	of 	Competition, 	Economics, 	and
Consumer 	Protection 	of 	the 	Federal 	Trade 	Commission. 	Although
the 	Commission 	has 	authorized 	the 	presentation 	of 	this 	statement,
the 	views 	expressed 	are 	not 	necessarily 	those 	of 	the 	Commission
or 	of 	any 	individual 	Commissioner.
1

u. 	S. 	Department 	of 	Transportation 	concluded 	that 	consumers 	lose
nearly 	$800 	million 	annually 	from 	regulations 	res:ricting 	entry
of 	new 	cabs 	and 	preventing 	fare 	discounting. 	Mereover, 	removal
of 	these 	laws 	would 	create, 	according 	to 	the 	St~cy, 	38,000 	new
jobs 	for 	small 	business.
We 	understand 	that 	the 	Police 	Commission 	is 	~nly authorized
to 	consider 	changes 	in 	the 	number 	of 	medallions 	issued. 	It 	is
our 	view, 	however, 	that 	completely 	open 	entry 	(s~jject to
reasonable 	safety 	standards) 	is 	in 	the 	best 	interest 	of
consumers. 	The 	principal 	losers 	from 	excessive 	:axicab
regulation 	are 	consumers 	who 	pay 	higher 	fares. 	~:th excessive
regulation, 	consumers 	also 	wait 	longer 	for 	cabs 	~: 	do 	without
service 	altogether. 	Studies 	show 	that 	the 	groups 	most 	affected
are 	the 	poor, 	minorities, 	and 	the 	elderly, 	who 	sFend 	a 	larger
proportion 	of 	their 	income 	on 	taxi 	rides 	than 	de 	other 	segments
of 	the 	population.
In 	contrast, 	the 	principal 	beneficiaries 	of 	~aintaining the
system 	of 	restricted 	entry 	are 	the 	current 	holders 	of 	taxicab
permits. 	Limitations 	on 	the 	number 	of 	permits 	e~able medallion
owners 	as 	a 	group 	to 	provide 	less 	service 	or 	charge 	higher 	prices
than 	those 	that 	would 	exist 	under 	open 	entry.
Proponents 	of 	restricted 	entry 	typically 	arg~e that 	if
additional 	medallions 	are 	issued 	there 	will 	be 	"too 	many"
taxis. 	What 	this 	contention 	reflects 	is 	a 	desire 	to 	be 	exempt
from 	competition. 	Open 	entry 	does 	not 	mean 	that 	all 	or 	even 	most
taxicab 	operators 	will 	go 	bankrupt. 	As 	with 	most 	businesses,
those 	operators 	offering 	higher 	quality 	service 	a: 	lower 	prices
2

will 	prosper 	while 	less 	competitive 	operators 	w::l 	not. 	The
police 	Commission 	should 	consider 	the 	likely 	be~efits to 	the
public 	of 	freer, 	less 	restricted 	entry: 	lower 	pr:ces 	and 	better
service.
Are 	there 	insoluble 	problems 	that 	occur 	whe~ entry
restrictions 	are 	removed 	in 	the 	taxicab 	business? 	Not 	if 	it's
done 	correctly. 	Deregulation 	need 	not 	result 	in 	unsafe
taxicabs. 	San 	Francisco 	can 	continue 	to 	maintai~ reasonable
levels 	of 	safety 	and 	quality 	in 	the 	city's 	taxicab 	fleet 	with
open 	entry.2 	Open 	entry 	means 	merely 	giving 	qua:ified 	licensees
the 	chance 	to 	compete 	and 	giving 	consumers 	the 	f~ll 	value 	of
their 	fares.
Will 	open 	entry 	mean 	that 	new 	taxi 	cabs 	wil: 	simply 	charge
the 	maximum 	fares 	now 	imposed 	by 	San 	Francisco? 	Not
necessarily. 	Charlotte, 	North 	Carolina, 	opened 	entry 	in 	1982 	and
allowed 	taxi 	companies 	to 	set 	their 	own 	fares. 	No 	taxi 	firm
increased 	fares 	for 	two 	years 	and 	discounts 	have 	been
prevalent. 	Similar 	reports 	come 	from 	Jacksonvi::e, 	Florida 	and
Madison 	and 	Milwaukee, 	Wisconsin. 	Moreover, 	special 	senior
citizen 	discounts 	became 	available 	in 	Madison 	and 	Sacramento
following 	deregulation.
Will 	open 	entry 	diminish 	service? 	Many 	cities 	report 	that
service 	has 	improved 	under 	deregulation. 	In 	JacKsonville 	and
Oakland, 	open 	entry 	led 	to 	an 	increase 	in 	fleet 	maintenance 	and 	a
2 	If 	the 	minimum 	levels 	for 	quality 	and 	safety 	are 	set
arbitrarily 	high, 	they 	could 	act 	as 	de 	facto 	res:rictions 	on
entry. 	However, 	reasonable 	standards 	should 	not 	have 	any
significant 	anticompetitive 	effect.
3

reduction 	in 	vehicle 	age 	as 	new 	taxicabs 	entered. 	In 	Milwaukee,
Santa 	Barbara, 	and 	Seattle, 	taxi 	competition 	red~ced the 	waiting
time 	for 	a 	cab. 	In 	addition, 	Milwaukee 	obtained 	better 	control
over 	the 	qualifications 	of 	cabs 	and 	drivers. 	Unsafe, 	uninsured,
unregistered 	drivers 	are 	disappearing 	from 	the 	s::eets.
The 	Police 	Commission 	took 	a 	position 	in 	fa·;~r of 	freer
entry 	when 	it 	increased 	the 	number 	of 	meda1lior.s 	in 	1984. 	Based
on 	the 	economic 	evidence 	and 	recent 	experience 	t~:oughout the
country, 	we 	strongly 	support 	issuance 	of 	additio~al medallions 	in
San 	Francisco. 	New 	entry 	into 	the 	taxicab 	busir.ess, 	consistent
with 	maintenance 	of 	safe 	and 	competent 	service, 	.ill 	benefit 	San
Francisco 	residents 	and 	visitors 	by 	reducing 	waiting 	time 	for
taxis, 	fostering 	fare 	discounting, 	and 	creating 	employment
opportunities.
Thank 	you 	for 	this 	opportunity 	to 	present 	t~e 	views 	of 	the
Federal 	Trade 	Commission 	staff.
4

·....
Ut-cTIED STATES COURT OF rnTERNATIONA!.. TRADE
•
OJG ELECTRIC INDUSTRY COMPANY,
UMITED,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defeooa."'lt.
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Court No. 86-::7-00833
(Judge Carmc:.:..
FEDERAL 	TRADE 	COMMISSION'S
MOTION 	TO APPEAR 	AND 	FILE 	BRIEFS
A."1ICUS 	CURIAE
Pursuant 	to 	Rule 	76 	of 	the 	Rules 	of 	this 	Cc~rt, 	the 	Federal
Trade 	Commission 	("Commission"), 	an 	agency 	of 	t~e United 	States
government, 	moves 	this 	Court 	for 	an 	order 	grant:ng 	the 	Commission
permission 	to 	file 	briefs 	in 	these 	proceedings 	c~icus curiae, 	to
make 	such 	other 	appearances 	as 	are 	necessary 	an= 	appropriate 	to
present 	its 	amicus 	curiae 	position, 	and 	to 	participate 	in 	oral
argument. 	The 	Commission 	also 	moves 	this 	Court 	for 	an 	order 	that
it 	be 	served 	with 	all 	papers 	filed 	in 	connectio~ with 	these
actions. 	The 	grounds 	for 	this 	motion 	are 	set 	forth 	in 	detail
below.
Commission 	Interest 	and 	Reasons 	for 	Amicus 	Appearance
The 	Commission 	enforces 	Section 	5 of 	the 	Federal 	Trade
Commission 	Act, 	15 	U.S.C. 	§45, 	to 	protect 	the 	American 	economy
and 	the 	American 	consumer 	from 	unfair 	methods 	of 	competition, 	a
concept 	that 	incorporates 	antitrust 	principles. 	The 	Commission...

is 	concerned 	to 	ensure 	that 	sound 	and 	consistent 	economic
principles 	are 	considered 	in 	applying 	the 	laws 	dealing 	with
unfair 	competition, 	both 	by 	the 	Commission 	and 	by 	the 	agencies
that 	enforce 	the 'trade 	laws. 	Moreover, 	the 	Comrrission 	is
concerned 	that 	trade 	law 	decisions 	affecting 	competition 	in 	the
United 	States 	may 	impair 	the 	Commission's 	ability 	to 	enforce 	the
antitrust 	laws 	effectively. 	P~rticipation by 	the 	Commission 	as
an 	arricus 	here 	may 	assist 	the 	Court 	by 	providing 	a 	broader
competition-policy 	context 	needed 	to 	arrive 	at 	decisions 	that
harmonize 	the 	enforcement 	of 	the 	trade 	laws 	with 	the 	antitrust
laws. l
This 	appeal 	concerns 	the 	final 	determination 	by 	the
Department 	of 	Co~~erce 	("the 	Department") 	on 	the 	methodolgy 	for
computing 	the 	size 	of 	the 	dumping 	margin 	for 	64K 	dynamic 	random
access 	memory 	components 	("64K 	DRAMs") 	imported 	from 	Japan. 	51
Fed. 	Reg. 	15943 	(April 	29, 	1986). 	One 	of 	the 	issues 	presented 	in
this 	appeal 	-- 	whether 	to 	use 	Rconstructed 	value" 	-- 	is 	similar,
if 	not 	identical, 	to 	one 	of 	the 	issues 	presentee 	in 	the
Department's 	investigation 	of 	alleged 	dumping 	of 	256K 	and 	above
dyna~ic random 	access 	memory 	components 	( ft 256K 	DRAMs") 	imported
from 	Japan. 	Prior 	to 	the 	Department's 	final 	determination 	in 	64K
1 	This 	case 	illustrates 	the 	need 	to 	harmonize 	the 	two
statutes. 	Micron 	Technology, 	Inc. 	(RMicron a ) 	alleged 	in 	its
June 	1985 	antidumping 	petition 	(at 	24) 	that 	Japanese 	firms
are 	selling 	64K 	DRAMs 	below 	cost 	in 	order 	to 	destroy 	United
States 	producers 	and 	that 	the 	Japanese 	firms 	would
subsequently 	raise 	prices 	to 	recoup 	their 	losses. 	Micron
made 	a 	similar 	allegation 	of 	predatory 	pricing 	in 	an
antitrust 	complaint. 	Micron 	Technology 	Inc. 	v. 	Hitachi 	Ltd.
et 	al., 	Civ. 	No. 	85-1329 	(D. 	Idaho, 	filed 	September 	1985) 	at
~47.
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DRAMs, 	the 	Commission's 	staff 	filed 	with 	the 	Department 	a
prehearing 	brief 	concerning 	this 	issue 	in 	256K 	DRAMs, 	and 	the
CommissiOn's 	~taff also 	participated 	in 	the 	Department's 	public
hearing 	on 	256K 	D~~s.2 	Moreover, 	in 	connection 	with 	the 	final
determination 	by 	the 	International 	Trade 	Commission 	(RITC") 	of
injury 	in 	64K 	DRAMs, 	the 	Commission 	filed 	prehearing 	and
posthearing 	briefs 	and 	participated 	in 	the 	lTC's 	public
hearing. 	The 	Co~~ission is, 	therefore, 	familiar 	with 	the 	facts
and 	issues 	presented 	in 	this 	appeal.
Respectfully 	submitted,
Robert 	D. 	Pa~l
General 	Co~nsel
Jeffrey 	I. 	Zuckerman
Director
Bureau 	of 	Competition
Edward 	F. 	Glynn, 	Jr.
Assistant 	Director 	for
International 	Antitrust
Bureau 	of 	Competition
Benjamin 	Cohen
Attorney
Bureau 	of 	Competition
Attorneys 	for
Federal 	Trade 	Commission
6th 	& Pennsylvania 	Ave., 	N.W.
Washington, 	D.C. 	20580
(202) 	634-4784
October 	,1986
2 	Although 	the 	256K 	DRAMs 	investigation 	has 	been 	suspended, 	51
Fed. 	Reg. 	28396 	(August 	7, 	1986), 	the 	principles 	articulated
by 	this 	Court 	in 	this 	appeal 	will 	pres~ma~ly have 	. 	.
precedential 	value 	for 	the 	Department 	ln 	lts 	determlnatlons
of 	the 	foreign 	market 	value 	and 	the 	United 	States 	price 	that
are 	called 	for 	in 	section 	C of 	the 	suspension 	agreement.
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..I 	. 'i_-I
UNITED 	STATES 	COURT 	OF 	INTERNATIONAL 	TRADE
•
OKI ELECTRIC INDUSTRY COMPANY,
LIMITED, Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.
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ORDER
Upon 	reading 	and 	filing 	the 	Federal 	Trade 	Cc=~ission's
Motion 	To 	Appear 	and 	File 	Briefs 	Amicus 	Curiae, 	a~d 	upon 	all
other 	papers 	and 	proceedings 	herein, 	it 	is 	hereb~
ORDERED 	that 	the 	Federal 	Trade 	Commission's 	~otion is
granted; 	and 	further
ORDERED 	that 	the 	Federal 	Trade 	Commission 	bE 	permitted 	to
file 	briefs 	amicus 	curiae, 	to 	make 	such 	other 	aPF~arances before
this 	Court 	as 	are 	necessary 	and 	appropriate 	to 	present 	its 	amicus
curiae 	position, 	and 	to 	participate 	in 	oral 	agru~~nts; and
further
ORDERED 	that 	the 	Federal 	Trade 	Commission 	bE 	served 	with 	all
papers 	filed 	in 	connection 	with 	this 	action.
Judge
Da ted 	~--:-_--:'~-:-- 	1986
New 	York, 	New 	York