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Updated Mississauga Report FINAL STUDY OF REGULATIONS FOR TRANSPORTATION NETWORK COMPANIES (“TNCs”) FINAL REPORT February 2, 2016 The “Study of Regulations for Transportation Network Companies” was prepared by the Transportation Practice Group of Windels Marx Lane & Mittendorf, LLP in response to a public solicitation by the City of Mississauga awarded to the firm following a competitive procurement process. The overwhelming majority of services were contributed Pro Bono, including any and all services by Chair of the firm’s Transportation Practice Group, Matthew W. Daus, Esq. This report has been supplemented to include new material based on the direction given at the December 7, 2015 PVAC meeting, to update the report to address the following: • Update the review and analysis of TNC laws, regulations, and litigation in various jurisdictions across Canada. • Review and address Uber’s response to the “Study of Transportation Network Companies” dated December 7, 2015. • Provide a review and analysis of the Harmonized Sales Tax (HST)/(GST) issue as it relates to TNCs. Newly included sections are designated in the Table of Contents as [NEW] and updated sections are designated as [UPDATED]. Matthew W. Daus, Esq. Partner & Chair, Transportation Practice Group Windels Marx Lane & Mittendorf, LLP http://www.windelsmarx.com/index.cfm T. 212.237.1106 F. 212.262.1215 [email protected] 2 Table of Contents Executive Summary...................................................................................................................................... 4 1 Methodology ......................................................................................................................................... 2 2 History and Background – The Existing Paradigm and Framework .................................................... 2 2.1 Overview of the Existing Regulatory System in Mississauga ...................................................... 2 2.2 Definitions of For-Hire Ground Transportation Sub-Modes and Services ................................... 3 2.3 Licensing Standards and Requirements ........................................................................................ 4 2.4 The State of the Market ................................................................................................................. 8 2.5 Sustainability and Long-term Impact on Driver Income and Plate Values ................................. 10 2.6 Accessibility ................................................................................................................................ 10 2.7 Airport Regulations ..................................................................................................................... 11 3 New Entrants & Technologies ............................................................................................................ 11 3.1 History of Entry .......................................................................................................................... 12 3.2 Business Models and Services Offered by Uber ......................................................................... 12 3.2.1 Rate Structure & Dynamic Pricing ..................................................................................... 12 3.2.2 Services ............................................................................................................................... 12 3.2.3 Wheelchair Accessible Compliance .................................................................................... 13 3.2.4 Licensing Standards ............................................................................................................ 13 3.3 Public Opinion of New Entrants ................................................................................................. 14 3.4 Benefits of Transportation Network Companies ......................................................................... 15 4 Application of Existing Paradigm and Licensing Structure to New Entrants ................................... 15 4.1 Comparison of New Entrant’s Local Business Model to Existing Regulations – Do the Existing Regulations Apply or Not? ..................................................................................................................... 15 4.2 Identification of Non-Compliance or Loopholes ........................................................................ 16 5 Benchmarking & Best or Accepted Practices ..................................................................................... 16 5.1 International History and Overview of Smartphone App Movement ......................................... 17 5.1.1 Canada ................................................................................................................................. 17 5.1.2 United States ....................................................................................................................... 22 5.1.3 Europe ................................................................................................................................. 29 5.2 Transportation Network Company (TNC) Laws ........................................................................ 30 5.2.1 Overview of TNC Laws & Differing Regulatory Approach............................................... 30 5.2.2 Litigation Affecting TNC Laws and Business Model ......................................................... 30 6 Public Comments - PVAC Meeting Testimony and Written Comments [UPDATED] ..................... 36 7 Policy Options for By-Law Enforcement and/or Revisions ............................................................... 37 3 Option 1: Capture TNCs Under Current Regulations Using Amendments ........................................ 37 Option 2: New Licensing Category (Equal Regulation) ..................................................................... 40 Option 3: New Licensing Category (Unequal Regulation) ................................................................. 41 Option 4: Complete Deregulation Option ........................................................................................... 43 Option 5: Pilot Program: Using New Entrants to Solve Regulatory Problems and Improve Service. 45 Option 6: Provincial Regulation ......................................................................................................... 46 Additional Considerations [UPDATED] ................................................................................................ 47 8 Canadian Transportation Network Company Litigation & Regulatory Activity [NEW] ................... 55 9 GST/ HST [NEW] ............................................................................................................................... 71 10 Appendices Appendix A: Compilation of TNC Regulations Appendix B: Compilation of All Litigation Against TNCs in the United States Appendix C: Compilation of All TNC Incidents Appendix D: PVAC Meeting Summary Appendix E: Comments by Stakeholders Submitted to Windels Marx in Preparation for the Study Appendix F: Uber Comments in Response to the Study’s Initial Draft [NEW] Appendix G: Response to Uber Comments [NEW] 4 Executive Summary The idea of using a smartphone application to request rides is a simple one. Companies, often known generically as Transportation Network Companies (“TNCs”), offer to the public an app that provides on-line booking of what some TNCs refer to as “ridesharing services.” Under this arrangement, passengers request a ride from a private passenger vehicle driven by an oftentimes non-commercially licensed driver through the app. The driver of the vehicle is given the passenger’s location through GPS. This app also provides a fare to the passenger and a system by which the driver and passengers can rate each other. A passenger’s credit card information is saved within the app so that it can be used for future trips and to make future transactions more convenient because they are cashless. The TNCs often believe local regulations regulating for-hire vehicles do not apply to them, preferring to conduct their own background checks of drivers, and set their own insurance requirements and vehicle requirements. This new approach to less regulated transportation services has been repeatedly referred to as a newly “innovative” business model, and has caused regulatory issues for municipalities all around the world, as they deliberate on how to address the issues of TNCs. Many jurisdictions believe that TNC operations fall under their for-hire vehicle licensing laws, however, TNCs often argue that they are not transportation companies, but are technology companies. One defining characteristic of TNCs is that that they consider themselves disruptors. Their business model includes TNCs going into a jurisdiction and operating without regard for existing regulations. They will often continue to operate until challenged by local regulators or law enforcement officials. When TNCs enter jurisdictions without proper licensing, many jurisdictions have answered by filing lawsuits, as Edmonton and Toronto have done, to block their operations. When TNCs have been blocked by these lawsuits, it sometimes compels them to work with local regulators to create a system in which the TNC model can operate, or to cease operations. Jurisdictions have addressed TNCs in a wide range of ways, from requiring them to follow laws applicable to all other TNCs, to creating a separate category of regulations for TNCs, to deregulation of the for-hire vehicle industry. This
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