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Essay Sample: Effects of Banning Ridesharing Companies

5 pages
1134 words
University of California, Santa Barbara
Type of paper: 
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The sharing economy involves matching people who intend to share assets online. The costs and benefits associated with such a shared economy depend on the business model in place. Ridesharing companies are part of such shared economy. These companies provide shared rides on a very short notice. The services are arranged using technological means that make use of GPS navigation devices, smartphones, and social networks. The ridesharing companies have been faced with complaints from other regulated taxi companies with claims that they are engaging in unfair competition. Uber, one of the rapidly growing ridesharing company, has been faced with lawsuits leading to courts restricting or banning their services in some states. Their services are relatively cheaper than those provided by other companies yielding to their drastic growth worldwide. The discussion that follows will analyze the benefits and drawbacks that result from banning the ridesharing companies in an attempt to eliminate competition.

Competition in a business environment is a positive aspect that ensures that businesses improve their service delivery. However, an unfair competition that seems to be aimed at kicking other competitors out of the market is a threat and needs to be regulated. The ridesharing companies, particularly Uber, poses a major threat to the survival of other companies providing similar services. This is largely because their rates are relatively lower than regular taxis and are, therefore, preferred by many customers. Banning the ridesharing companies would to an extent minimize the excessive competition that is considered unfair by other taxi companies. Ubers entry into the market made the conditions of the regular taxis difficult as relates to the acquisition of licenses. Regular taxis need licenses to operate while Uber drivers do not require licenses to enter the market. The operators of traditional taxi industry, therefore, experience heavier costs in acquiring the licenses, yet these licenses do not protect against competition from the ridesharing companies. As such, banning the ridesharing companies and regulating them as other traditional operators go a long way in equalizing the competitors in the market.

There have been concerns about the circumstances under which drivers for the ridesharing companies operate. They are treated as independent contractors and as such do not enjoy the protection of these companies. This means that any harm or unfortunate occurrence that they would encounter in their line of duty is not covered by the company. This is a risky situation for the drivers who may encounter instances such as violence from passengers. For the regulated taxi industry, since the vehicles are registered, drivers are considered as employees of the companies they work for and are therefore covered in the case of an unfortunate occurrence. Some drivers from these ridesharing companies have gone to court seeking to be considered as employees to these companies and as such enjoy employment benefits. Some courts have ruled in favor and others against these suits. This has resulted in controversy since it is not clear which position these drivers stand as far as employment is concerned. A ban on the ridesharing companies will help end this controversy and uncertainty. When clear lines have been established concerning these issues, the companies can resume their operations.

Banning ridesharing companies potentially result in more drawbacks than benefits. Such an action would have a negative impact on the economic and social aspects of the society. A ban would lead to a significant economic loss. This is caused by several factors. One, the ridesharing companies such as Uber and Lyft have proved to provide transportation services that enable cost saving since their entry in the market. Due to their lower rates, passengers can save on transportation cost and use the savings to cover other expenses. Banning these companies would send back the people into utilizing services charging relatively higher rates, increasing their expenditure on transportation. Higher spending translates to higher costs of living which is bad for an economy. Two, banning these companies means cutting away sources of livelihoods for the employees of these companies. Drivers and other staff members who rely solely on providing these services to earn their income would be left jobless. Unemployment is a major drawback to the growth of an economy. Third, the operations of these companies contribute to the economies of the cities in which they operate through taxes. Efficient transportation is also a major contributor to the growth of an economy. Therefore, banning these companies significantly impacts the economy negatively.

A ban on ridesharing will kill competition in the transportation industry. Competition is a healthy practice which ensures that companies strive to provide improved services to win customers. The ridesharing companies, particularly Uber has been associated with stirring a need to improve services on the traditional taxi companies. Ubers entry in the market was reported to cause a drop in demand for the traditional taxis. San Francisco, for example, reported a 65% decline in demand for traditional taxis between 2012 and 2014 after Ubers entry. The demand for Uber services is associated with their improved customer services. The traditional taxis responded to this competition by improving their services which regulated the threatening fall on demand. Such competition can be considered healthy since it results in better services to customers. Banning the ridesharing companies would result in a reluctance by the traditional taxis in improving their services. The existence of the ridesharing companies keep them on their toes and ensure that they are alert to the quality of services they offer.

Socially, banning the ridesharing companies would affect the trend of trust and accountability between drivers and passengers that have been built by the ridesharing companies. These companies, through their online platforms, have been able to provide a sense of trust and accountability by linking the drivers with the passengers. Uber, for instance, provides even the photo of the driver and the registration details of the car, such that the passenger is already acquainted with the driver before taking the ride. Through the app, the passenger can also track the proximity of the car from where he or she is. These provisions are not available in the traditional taxi industry, yet they go a long way in increasing customer preference to the ridesharing taxis as opposed to the traditional ones. This could be a learning platform for the traditional taxis and would encourage them to pick up the technology. Therefore, a ban on the ridesharing companies is an attack on technological advancement.

In summary, banning ridesharing companies has both positive and negative impacts. Positively, it removes unfair competition and solves the controversy and uncertainty surrounding the working conditions of the employees, especially drivers. Negatively, a ban negatively affects the economy, affects healthy competition, implicates social progress between stakeholders in the transportation sector, and is an attack on technological advancement in the transportation industry. Instead of banning the companies, regulations should be applied where necessary.

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