L&L - Protectionism in Portland
IJ client Mike Porter and another transportation entrepreneur faced $895,000 in fines from the city of Portland, Ore., for offering a Groupon discount that provided discounted car service to consumers.
Ronald Reagan famously said the 10 most dangerous words in the English language are, “Hi, I’m from the government, and I’m here to help.” As if to prove his point, the city of Portland, Ore., is threatening to put limo and sedan operators out of business for the supposed crime of charging their customers too little.
When two luxury car services—Towncar.com and Fiesta Limousine—recently offered $32 promotional fares on the daily deal site Groupon.com, Portlanders quickly scooped up the deal.
Within hours of the deals’ posting, however, city regulators forced Towncar.com and Fiesta Limousine to cancel their promotions and issue refunds to every one of their nearly 900 customers, threatening the companies with a combined $895,000 in penalties and suspension of their operating permits if they did not immediately comply.
When did giving your customers a good deal become illegal? The answer is in 2009, when Portland rewrote the for-hire transportation rules with the explicit purpose of shielding taxicab companies from price competition.
Now limo and sedan operators must charge at least 35 percent more than the prevailing taxicab fare, and at least $50 for trips to the airport. Additionally, car services (as limos and sedans are collectively called) must wait a minimum of 60 minutes between the time a customer calls and the time they are picked up.
Faced with losing their businesses, Towncar.com and Fiesta Limousine agreed to cancel their promotions and refund their many disappointed customers. But the two companies are not giving in to Portland’s crony capitalism.
On April 26, they teamed up with the Institute for Justice and filed a federal lawsuit challenging the constitutionality of Portland’s minimum fare laws and its minimum wait time.
These laws have nothing to do with protecting public safety. They have everything to do with economic protectionism. And that is not just wrong; it is unconstitutional.
Portland’s largest taxicab company actually asked the city to stop other businesses from “poach[ing] taxi fares out of downtown.” Surprisingly, the city’s Revenue Bureau agreed that affordable limo and sedan services were a “problem” simply because they threaten the profits of taxicab companies, and its director encouraged the city council to “make it more difficult for them to take the taxi rides, the lucrative rides from the hotels to the airport.”
But the government has no business picking winners and losers in the transportation industry, especially when the losers are consumers and the winners are established taxicab businesses that only want to charge their customers more. What taxi companies call “poaching,” others call honest competition.
Minimum fare laws are becoming a nationwide problem, as taxicab companies and expensive limousine companies look for creative—if unconstitutional—ways to protect their profits. IJ is also suing Nashville, Tenn., over its $45 minimum for limo and sedan services.
The government should be “here to help” the free market, not existing businesses who want to shield themselves from competition at everyone else’s expense.
Wesley Hottot is an IJ Texas Chapter attorney.