Bloomberg News

Uber Competitor Lyft Delays N.Y. Start After State Sues

July 11, 2014

Lyft App

New York Attorney General Eric Schneiderman sought a temporary restraining order against the company, arguing that Lyft Inc. hasn’t complied with state and local regulations, including insurance laws. Photographer: Andrew Harrer/Bloomberg

Uber Technologies Inc. car-sharing service rival Lyft Inc., which planned to begin operations today in New York City, delayed the start after being sued by state officials accusing it of flouting licensing laws.

New York Attorney General Eric Schneiderman sought a temporary restraining order against the company, arguing that Lyft hasn’t complied with state and local regulations, including insurance laws.

“As it has done in every other city in which it operates, defendant has simply waltzed into New York and set up shop while defying every law passed whose very purpose is to protect the people of the state of New York,” Schneiderman’s office said in a complaint filed today in state court in Manhattan.

Lyft’s agreement not to start service before a July 14 hearing on that request was accepted by state court Justice Kathryn Freed. The “status quo” will prevail until then, she said.

Lyft, based in San Francisco, said on July 9 that it would start offering mobile-booking ride-sharing services by today in New York with 500 drivers, bringing more competition to Uber, which was valued at $17 billion in its latest financing round. Lyft started operating in two other New York cities, Buffalo and Rochester, on April 24, without approval or authorization, according to the state’s complaint.

‘Path Forward’

“We always seek to work collaboratively with leaders in the interests of public safety and the community, as we have done successfully in cities and states across the country, and hope to find a path forward for ride-sharing in New York,” Erin Simpson, a spokeswoman for Lyft, said in an e-mailed statement.

The complaint was also filed by the office of Benjamin Lawsky, superintendent of the New York Department of Financial Services.

Lawsky’s office on July 8 issued a cease and desist letter, saying Lyft was violating state laws, including selling insurance directly to New York drivers and requiring them to buy from a specific insurer in order to join its program. Lawsky said in the letter that he is willing to work with Lyft to determine how the company can operate legally in the state.

Insurance Claims

In a separate case filed today, Lyft asked a judge to block the state’s subpoena of the company, arguing the operational documents requested by the state are “utterly irrelevant” to the dispute.

Lyft doesn’t require drivers to hold commercial licenses, conduct vehicle safety inspections or take defensive-driving courses, the state officials claimed. The company also doesn’t conduct drug tests on drivers, the officials said.

The New York City Taxi & Limousine Commission also weighed in, saying on July 9 that Lyft hasn’t complied with safety requirements and licensing criteria. At the time, Lyft said it would start the service anyway.

Uber, which has been operating in the city since 2011, has also encountered legal hurdles in its New York operations with regard to the fee it charges customers. The San Francisco-based company reached an agreement with Schneiderman’s office to limit its peak-pricing tactics and cap fees during emergencies, potentially restricting revenue.

Unlike traditional taxis with fixed fares, Uber varies its tariffs depending on demand. Uber agreed with the attorney general’s office earlier this week to limit pricing during “abnormal disruptions of the market” under an accord. The company sometimes charged as much as eight times its base rate during storms, Schneiderman said.

While UberX, its lower-priced service, is a ride-sharing offering that competes directly with Lyft in other cities, UberX drivers in New York have official taxi licenses and operate more like a taxi service.

The case is The People of the State of New York v. Lyft Inc., Supreme Court of the State of New York (Manhattan).

To contact Bloomberg News staff for this story: Erik Larson in New York at elarson4@bloomberg.net; Serena Saitto in New York at ssaitto@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Pui-Wing Tam at ptam13@bloomberg.net; Andrew Dunn at adunn8@bloomberg.net Fred Strasser, Reed Stevenson


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