California Notifies App-Based Ride Service Uber and Competitors that Service is Illegal

The big story on the Internet today is about the new app-based ride service Uber:  California regulators have just notified Uber and its competitors, Lyft and Sidecar, that the services are illegal under California law.

An article by Forbes Contributor Mark Rogowsky offers a fairly comprehensive explanation of California’s problem with these services.  Apparently the issue raised is a violation of Section 5401 of the California Public Utilities Code, which involves how charter party carriers of passengers are compensated.  The letter advised each company that they could petition the CA legislature to change the applicable law, but until the law was changed that California would be enforcing state law.

Tech Crunch published the reactions of each of the affected companies to the notice letter.

I agree with the commentators who are struck by the irony by the fact that California of all states is imposing the roadblock that threatens to shut down these services.  Clearly, there are a lot of businesses in the state that unhappy with all the attention that these new business models are attracting, but it is more than a little surprising that the California government itself–undoubtedly the greenest of the 50 state governments–is the one that is threatening to shut down the business model.  I suspect that new legislation is going to get rushed through the California state legislature to fix this little snafu in a hurry.  What do you think?

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