May 21, 2017 / 11:15 AM / 3 months ago

Texas lawmakers clear way for Uber, Lyft return to major cities

5 Min Read

A man arrives at the Uber offices in Queens, New York, U.S., February 2, 2017.Brendan McDermid

AUSTIN, Texas (Reuters) - Texas governor Greg Abbott will sign in the next few days a bill that would shield ride-hailing firms Uber and Lyft from bruising battles over fingerprint background checks that led them to leave some of the state's most important markets.

Lawmakers last week approved the legislation known as House Bill 100 that sets up statewide regulations for the companies. It clears the way for Lyft Inc to reenter Houston, where Uber Technologies Inc currently dominates, and for both to reenter Austin, Corpus Christi and Galveston.

More than 40 states have set up statewide regulatory systems for ride-hailing companies such as Uber and Lyft that can be used to override local regulations in most places, according to the National Conference of State Legislatures.

"There is definitely a national, coordinated push from the industry to enact regulations for this type of transportation at the state rather than city level," said Lara Cottingham, deputy assistant director of administration and regulatory affairs for Houston, which opposed the state bill because it could supersede city regulations. 

The Texas legislature on May 17 approved HB 100, a bill that eliminates local ordinances such as a fingerprint measure in Austin, which passed despite company objections and prompted the two firms to leave the Texas capital last year.

Also on May 17, lawmakers in Alaska, Louisiana and New York advanced legislation that also would take ride service regulations out of local hands.

Lawmakers in cities including Los Angeles, Chicago and San Francisco have argued that fingerprinting is needed for Uber and Lyft drivers. The companies say they already do comprehensive background checks, which make such measures unnecessary.

In Houston, the fourth most-populous U.S. city, Lyft left in 2014 over local ordinances including the fingerprint checks. Uber struck its own deal with local authorities to operate in Houston.

The Texas bill may also kill Houston regulations that ensure handicapped customers have access to services and customers can lodge complaints, officials said.

Mostly Republican backers of the bill said it benefits consumers by offering more choice and competition, which will drive down prices.

“A statewide framework for ridesharing will help bring greater economic opportunity and expanded access to safe, reliable transportation options to more Texans,” Sarfraz Maredia, general manager for Uber Texas, said in a statement.

Cautionary Tale

In a 2016 election, Uber and Lyft spent more than $10 million in an unsuccessful effort to roll back city regulation. That exceeded the amount spent by all candidates running for mayor and city council in their most recent election.

Taking that defeat as a cautionary tale, as the companies geared up to support the state bill they enlisted 34 lobbyists, according to Texas Ethic Commission data. For comparison, Texas-based American Airlines hired eight to lobby Texas for its business interests.

California based Uber and Lyft are expected to spend up to $2.3 million on lobbyists in Texas in 2017, non-profit tracking agency Texans for Public Justice reported after an examination of lobbyists' contracts as of March 2017. The companies did not respond to requests to comment on lobbyist spending.

The other trouble Uber and Lyft ran into in Austin came from startups. When the big companies left Austin, smaller ride service companies quickly employed about 10,000 drivers that they had abandoned.

Uber and Lyft said they will be back as soon as the governor, a Republican, signs the measure. Austin Mayor Steve Adler said state lawmakers should respect local voters.

"I’m disappointed that the legislature chose to nullify the bedrock principles of self-governance and limited government," he said.

The chief executive of non-profit Ride Austin, a new provider which averages about 60,000 rides a week, is worried Uber and Lyft will use their deep pockets to tilt the market in their favor.

"We do expect the giants to use their $12 billion in cash to try and crush our non-profit - but we believe the support of the Austin community and the Austin drivers will help us continue,' Andy Tryba said in an email.

Reporting by Jon Herskovitz; ASdditional reporting by Heather Somerville in San Francisco, editing by Peter Henderson, Dave Gregorio and Chizu Nomiyama

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