Last month the California Public Utilities Commission (CPUC) slapped several innovative ridesharing businesses with cease and desist orders for illegally operating as charter-party carriers without CPUC’s permission. SideCar is one of the companies that received such a letter and the business adamantly denies that it is in violation of the law.
SideCar helps people find rides around San Francisco. Here’s how it works. The SideCar smart phone app connects people looking for a ride with nearby drivers willing to pick up app users and drop them off at their destinations. The drivers are pre-screened but they have their own personal cars. The app notifies drivers when a rider puts in a request and the drivers decide whether or not to give someone a lift. Users pay voluntary donations through the app — not metered fares. The SideCar app displays the average donation given by riders for similar routes, but they can choose to pay any amount– even nothing at all.
SideCar has an interesting idea that could help eliminate urban congestion and provide a convenient transportation option for locals and tourists. But CPUC’s cease and desist order stated that if SideCar continues to operate, it will be guilty of a misdemeanor which is punishable by a daily $5,000 fine and/or imprisonment for up to three months. That’s a tough sentence for providing a useful service.
The experiences of SideCar and other ridesharing companies exemplify how the law can stifle cutting-edge ideas. Bureaucrats and start-up companies will continue to butt heads as innovative technologies revolutionize the ways we live and work. Ideally, SideCar and similar businesses will succeed or fail based on quality and consumer demand – not on regulatory barriers to entry. Entrepreneurs must often comply with laws that are not even meant to protect the public; instead, many regulations merely protect established companies from competition. Everyday great business ideas get lost and die in a maze of red tape, discouraging businesspeople with groundbreaking ideas and harming consumers who benefit from choice in the marketplace.