Ride-Sharing Is Legal in California, Regulators Vote Unanimously

Published on September 19, 2013
by Liz Gannes

The California Public Utilities Commission today approved a decision to legitimize for-profit ride-sharing companies. The ruling should give legal clearance to peer-to-peer driving services from startups like Uber, Lyft, Sidecar and Tickengo, if they meet certain parameters. It’s the first such decision in the U.S.

LyftCommissioners voted 5-0 in a meeting in San Francisco to create a new category called “transportation network companies.” Their decision is here.

The CPUC’s final decision seems to be essentially the same as a proposal released this summer, which, as I noted at the time, requires “company licensing, driver criminal background checks and $1 million per-incident insurance coverage.” As I said then, “Some of these practices are already instituted by the companies involved — they have all obtained insurance, and they screen drivers voluntarily.”

It wasn’t exactly what the venture-backed ride-sharing companies had initially hoped for — they had argued that they are online information services, not transportation services — but in some ways it’s better, because it’s a formal validation of the category.

The startups, of course, said they are overjoyed. “We made history today!” tweeted Sidecar CEO Sunil Paul.

“It’s fantastic that it was unanimous,” said Lyft COO John Zimmer in a telephone interview. “This provides more clarity in the market for the community that there are safety standards that we’re following and that we’re being held accountable for — and that this is a positive form of transportation for the state of California.”

Zimmer said he hoped other states would follow California’s lead, and had been told that might be the case, especially given most of the services launched here first and earliest.

The CPUC noted that the regulation will apply to Uber’s community UberX offering, but not the regular Uber black car- and taxi-hailing services. The difference is that “transportation network companies” are defined as ones where drivers use their personal vehicles.

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