The class action filed by Diva Limousine blames Uber's predatory pricing strategies for hurting legitimate chauffeured services.
Competition is said to be “healthy.” When a livery competitor, however, does not provide a legitimate service to the public by carrying the proper insurance, being legally registered, keeping equipment in adequate condition, and maintaining ethical business practices...competition is sometimes not only unhealthy, but fatal to those honest companies operating by the letter of the law.
Cut-rate competition is becoming a particular problem now that the industry is facing skyrocketing costs for insurance, licensing and other items. Rate increases seem inevitable for most operators subject to these higher costs. If costly new requirements are not effectively enforced, however, gypsy operators, can simply ignore them and enjoy an unfair competitive advantage.
The most recent Limousine & Chauffeur Operator Survey showed an average rate of $41.10 for a stretch limousine. Included among our responses, however, were a number of companies charging $30 per hour and one quoting an hourly rate of $25. It is difficult to imagine a legitimate service competing successfully against companies which operate at more than ten dollars an hour below the national average. Such rates simply do not produce the revenue needed by most services in order to operate profitably. In an attempt to compete with low priced owner-operators, uninsured operators, and gypsies of various breeds, legitimate livery services are unable to raise their rates even though they may face higher operating costs. Signs of attrition are appearing among livery services of all sizes across the country. “There has definitely been a clearing out of operators in Los Angeles in the last year,” says Alan Shanedling of Fleetwood Limousine in Southern California.
According to Shanedling, the problem of gypsy operators is partially caused by a lack of enforcement of California’s limousine laws. These laws require that an operator pay an annual registration fee and carry a minimum of $750,000 in liability insurance. “There was one operator who was cited thirty-one times by the PUC (Public Utilities Commission) before finally being brought before a judge. Then he got off with a $500 fine and a suspended jail sentence,” says Shanedling.
“Another example,” Shanedling continues, “is that I drove to the first of several Bruce Springsteen concerts in Los Angeles last August and saw that most of the other limousines didn’t have a PUC number on the back bumper. I called the PUC about it and when they went to inspect on the last night of the concerts, they found that about eighty percent of the limousines were unregistered. When I checked on the situation several months later, I was told there was nothing they could do about it because they cannot inspect a limousine without having ‘Probable Cause’ to suspect that a law is being broken. Many of the unlicensed people are one-car operators and it’s hard to prosecute them.”
Shanedling estimates that as many as fifty percent of the limousines and sedans in California are not covered by the state’s required minimum of $750,000 in liability insurance. “One of the problems,” he says, “is that travel agents and concierges who order limousines for people don’t care if cars are insured. They just want their commission. One time I was called to go pick up someone who had been riding to the airport in a limousine that broke down on the freeway Not only was the limousine not insured, the chauffeur didn’t even have a driver’s license.”
Limousine customers frequently choose a low priced limousine over one that is fully registered and insured according to Shanedling. “The customer that I picked up on the freeway, for example, didn’t understand why it was going to cost twice as much for me to drive him to the airport! I told him to look at what he was getting...a reliable, licensed and insured limousine. He said that he carried $300,000 in liability insurance but his company wouldn’t have been pleased to pay a claim that should have been covered by the limousine company.”
Shanedling says that operators who farm out business should consider whether the companies they refer business to have liability insurance. This will not only deprive illegal operators of business, he says, but will protect a company in the event that a claim results from the job. “If you farm out to an uninsured operator,” he says, “a claimant will go after you.”
Harold Berkman, of Music Ex-, press in Burbank, agrees with Shanedling that the Los Angeles area is severely hurt by illegal operators. “There are hundreds of gypsies in Los Angeles,” Berkman says. “They are a real hardship to legitimate operators,” he continues. “There are PUC regulations on the book but there is no money to enforce them.”
The problem of unfair competition also exists in Clifton, New Jersey where Michael Mancuso, of Michael’s Limousine Service, says that “One or two services in this local area operate illegally, especially in regard to insurance coverage.” Mancuso charitably believes that many of the services operating without a New Jersey license do so unwittingly. “We feel that they do it solely out of ignorance of the law,” he says, “but the state does not enforce compliance anyway.”
In Pennsylvania, Kerry Pacifico, of Carey Pacifico Limousine, also finds that the PUC and other government agencies are unable to enforce licensing and insurance regulations. “The only answer,” says Pacifico, “is through the lobbying of limousine associations.”
There is widespread frustration among licensed and insured operators that unfair competitors are so rarely prosecuted. Eleanor McCarthy of All Occasion Limousine in Chelmsford, MA feels that illegal competition “bites very deeply,” into the business of small livery services in her area. Among the offenders are funeral homes which are not properly insured to do proms, weddings, airport transportation, and special events according to McCarthy. “Unfortunately,” she says, laws affecting limousines “vary from state to state, and there’s not much that a small business can do about the situation”
Cris Portugal, President of Cris’ Limousine Service in Washington, D.C. and President of the National Limousine Association, was struck by the severity of the gypsy problem in New York City during a recent visit. “The situation there is terrible,” he says. “The city is full of sedans that call themselves limousines and compete with both taxicabs and limousines.” The problem gets little help from the Taxi and Limousine Commission which Portugal claims is “a joke.”
Another East Coast operator maintains that the best way to end the problem of gypsy operators is to boycott all limousine regulations which are not enforced consistently. This, he says, would force the appropriate agencies to commit themselves to enforcement, and would end the existing situation which places law abiding livery operators at a competitive disadvantage. “As things are now,” this operator says, “there is no respect for limousine laws and legislators are more concerned with the enforcement of bus and trucking regulations.” A Midwest operator would like to see tighter laws in which illegal limousines would be immediately impounded until the necessary regulations are met.
Michael A Coughlin is involved in the enforcement of PUC regulations in Los Angeles County. Coughlin admits that enforcement has been difficult but claims that the situation has improved over the last three or four months. “There is much more awareness of the laws on the part of limousine companies now,” he says, ‘and our enforcement efforts are becoming much more effective.
“One of the best ways for the PUC to prosecute an unlicensed operator,” Coughlin continues, “is for our enforcement people to be picked up by one.” In nearby Orange County, according to Coughlin, the PUC has an extensive enforcement program which includes “sting” operations where companies whose Yellow Page ads do not show their state license number are called by PUC investigators who file misdemeanor complaints against companies not properly permitted. Coughlin is involved in planning a similar program for Los Angeles County.
Los Angeles County is also conducting checks of vehicle registration at local airports and other frequent limousine destinations. The PUC is also working to publicize limousine regulations. One California law passed last fall forbids any limousine advertising which does not include a PUC identification number The PUC is instructing the Yellow Pages, and other advertising media, to require this number in all ads.
Coughlin also stated that the PUC had recently issued a statement to the media, including Variety, an entertainment publication, which warned about the use of unlicensed limousines by those attending the Academy Awards presentations on March 24, 1986. Coughlin mentioned that the limousines at the event would be checked for proper licensing requirements. Those found to be operating unlawfully will be candidates for a “sting operation.”
Coughlin hopes that efforts like these will help to educate the public, as well as the limousine industry, on the problem of gypsy operators and show that the regulations are being enforced. Some results of the program are starting to be seen. At a recent bridal fair in Southern California, for example, the threat of PUC monitoring effectively discouraged gypsies and cleared the way for legitimate operators.
This is one of few success stories thus far, however, and most operators feel that the PUC still lacks the power to prosecute effectively in the courts. When asked how effective the PUC has been in prosecuting offenders, Coughlin has little evidence that the courts have yet been an effective deterrent. He prefers to emphasize the growing amount of attention being given to the problem by the PUC and by the Los Angeles District Attorney’s office.
Coughlin points to a few signs of improvement and claims that, “The more we get into it, the more effective we will be.’’ One positive note, he believes, is that a Task Force in the Los Angeles Mayor’s office is looking into the problem of unlicensed cabs. “That will help to set legal precedents that can be used to prosecute illegal limousines,” he says.
The effect of gypsy operators is one of the concerns expressed strongly by Cyndy Littlefield, Executive Director of the National Limousine Association. “Gypsies are especially a problem in larger cities,” she believes. Littlefield is hopeful, however, that the situation will improve, “as the industry collectively assesses itself.”
The NLA is concerned that all of its members are legitimate livery operators and tries to confirm that applicants for membership are fully registered and insured. Another way that the NLA hopes to solve the gypsy problem is through its planned program of educating consumers about the limousine industry. “Making the public aware of issues like the gypsy problem is one of our long term goals,” says Littlefield.
The need for the public to recognize and support licensed and insured companies seems to be a key to solving the problem of gypsy operators. The Law of Supply and Demand promises that there will be gypsy limousines as long as the public values price above safety, reliability and legality Progress is being made on the problem, but there is a long road ahead.
The class action filed by Diva Limousine blames Uber's predatory pricing strategies for hurting legitimate chauffeured services.
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