Charging too little
April 11, 2005
I spent Thursday in lovely Tampa, Florida, deposing a witness in the case of Daniel Steiner. Mr. Steiner runs a limousine company—six Lincoln towncars (not stretch limos); employs five or six people. A very large part of his business consists of driving elderly and disabled clients to their doctors appointments in the Tampa area.
Last year, the county Public Transportation Commission put Steiner’s license on probation because they said he was charging too little.
The Commission, you see, has a rule that limousine companies are not allowed to charge less than $40 per hour, and must charge at least $40 per ride. The reason for this law? The County is quite explicit: it’s designed to protect taxi companies from having to compete fairly. “The establishment of various rates for the different types of transportation,” explained the Commission’s executive director, Greg Cox, in a 2003 letter,
protects the traveling public and also helps create a balance between the different transportation service “markets.” The...maximum rates for taxicabs and the minimum rates established for limousines help keep the two industries separate and therefore not directly competing against each other.
But the County’s own report on limousine utilization, says “[t]here are no clear patterns that sedan limousine operators are competing directly with taxicabs.” This is because limousine rides are usually arranged in advance, while taxis are usually hailed on the street corner. Nevertheless, the County worries that if they were to let limo companies charge less, all sorts of bad things might happen (dogs and cats living together; mass hysteria!) I attended a meeting with Mr. Cox and others last year, and when I suggested that limo companies should be free to charge less than $40 for a ride, a taxi driver at the meeting turned on me with shock and surprise. “Why, then we’d have little old ladies taking the limousine to the grocery store and back!”
“If my grandmother wants to ride a limo to the grocery store,” I answered, “that is none of your business. In fact, my grandmother would love that!”
But it’s not just taxi companies that are being protected; it’s the public, as well. Cox continues in his letter:
This way, both manage to survive in their respective market area and the “balance” is maintained...[so] they stay financially solvent and maintain a high quality of service and better maintained vehicles, thereby enhancing the safety of the traveling public.
What balance? Elementary economics tells us that if there’s no balance in a market, it’s either because the consumers don’t want “balance” or because there’s some barrier to trade. And as for protecting the public by making sure limousine companies stay financially solvent—if that were logical, why make the rate $40? Why not $200? Then the cars would be really safe!
The fact is, the only thing the public’s being protected from is low prices.
As one of Mr. Steiner’s elderly clients told the Commission when it was considering whether to put him on probation,
I don’t know what I would do if I didn’t have Mr. Steiner’s staff to help me get where I’m going. I am handicapped. I’m a Parkinson’s patient, and I do appreciate all the service that his staff gives. I’m very proud of that. And I would like to say to the Commission today...please, whatever you do, let Mr. Steiner stay in business.... Let him continue to help the old people such as myself and other people.
The Commission ignored this, and put Steiner on six months probation.
I’m proud to say that the Pacific Legal Foundation is now challenging the constitutionality of the minimum rate rule in Federal District Court. Daniel Steiner came to America from Brazil twenty years ago to support his family at an honest living. Punishing him for providing people with affordable rides to the doctor’s office is an embarrassment to the American Dream.