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Reeder: Consumers should regulate services

Published: Wednesday, Sept. 3, 2014 11:07 p.m. CDT

SPRINGFIELD – Awhile back I took a cab to Chicago’s Navy Pier and attempted to pay for my ride with a credit card.

My effort was greeted with a torrent of obscenities. The driver didn’t want to take my card despite a placard of regulations in the cab that said he must do so.

When I pointed out the stack of credit card carbons on his dashboard, he hollered even louder. It seems some drivers want the taxicab business to be strictly cash.

In the past year or so, an alternative to cabs came on the scene. It’s called Uber.

Folks can use an app on their cellphone to get a ride. No cash changes hands. It’s all done online. The drivers for Uber and its competitor, Lyft, have been screened by those companies and are driving their own cars. The pair get high marks for customer service.

But the competition had the owners of some big-time Chicago cab companies hopping mad.

The firms operate what economists call an oligopoly, that’s when a handful of big businesses control the market.

In June, the median price for a Chicago taxi medallion was $339,625. There aren’t too many cab drivers who can fork over that kind of dough. So these big taxi outfits buy the medallions and rent them out to drivers for a portion of the day.

The medallions are issued by Chicago City Hall.

So, the bureaucrats like it because it keeps money pouring into city coffers. The cab companies like the system because they can continue to control the market. And the politicians like it because they get campaign contributions from the cab companies.

That’s crony capitalism at its worst.

The group that isn’t being looked after in this arrangement is the consumer. Consumers suffer because they have to pay inflated prices.

And even though the industry is regulated, service can be – as my experience shows – pretty lousy.

But now there is a game changer in the mix – Uber.

So what did the taxi company fat cats do when they found out they might have to really compete? They started hiring Springfield lobbyists left and right. And they tried to force onerous regulations on Uber and Lyft.

The measure passed with the help of a coalition of Chicago Democrats and downstate Republicans. To his credit, Gov. Pat Quinn vetoed the measure this past week.

He cited the “home rule” powers of cities such as Chicago as a reason.

“The principle of home rule is an important one,” Quinn said in a statement. “I am vetoing this legislation because it would have mandated a one-size-fits-all approach to a service that is best regulated at the local level.”

But, governor, it is local government that created the cost prohibitive taxicab medallion system in the first place. It has helped keep the cost of cab rides high for consumers and prevented entrepreneurs lacking the money from going into the cab business.

This is service best regulated not at the state or local level.

The best regulators are the consumers themselves.

If they don’t like the service, they won’t use it.

• Scott Reeder is a veteran statehouse reporter and a journalist with Illinois News Network, a project of the Illinois Policy Institute. He can be reached at sreeder@illinoispolicy.org.

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