Judge Posner Smacks Around Cabbies For Thinking That Cities Allowing Uber Violates Their 'Property Rights'

It's no secret that cab companies and many cab drivers don't much like Uber and Lyft. Competition is tough. And cabs in most cities have survived thanks to artificial limits on competition through medallions and the like. This has always been a stupid, and frequently corrupt, system. For years, before Uber and Lyft came along, people talked about the ridiculousness of artificially limiting competition in this manner, but it was only once those companies came along that the true ridiculousness was made clear. While some forward looking cabbies have embraced these and similar systems, others have been fighting the new reality, often in fairly ridiculous ways. In Milwaukee and Chicago, cab companies sued those cities, arguing that allowing this type of competition amounted to a Fifth Amendment violation, in the form of "taking private property for public use without just compensation." What private property, you might ask? Well, according to the cab companies, the artificially restricted competition is their property. No, really.

The district courts didn't buy it, and now that it's moved up to the 7th Circuit appeals court, Judge Richard Posner isn't buying it either. In the two decisions -- Joe Sanfelipo Cabs v. City of Milwaukee and Illinois Transportation Trade Association v. Chicago, Posner makes quick work of explaining to these folks that the government restricting competition from entering your market isn't a property right that those who benefit from it get to make claims over (though he does, unfortunately, say that patents are a form of property in dismissing the "absurd" claims from the cabbies):

The plaintiffs' contention that the increased number ofpermits has taken property away from the plaintiffs withoutcompensation, in violation of the constitutional protection ofproperty, borders on the absurd. Property can take a varietyof forms, some of them intangible, such as patents. But a taxipermit confers only a right to operate a taxicab (a rightwhich, in Milwaukee, may be sold). It does not create a rightto be an oligopolist, and thus confers no right to excludeothers from operating taxis.

Posner notes that if there had been an explicit promise not to change regulations, that might have been one thing, but there was not. Similarly, he admits that the taxi permits are property, but that's unrelated to the issuing of more permits:

The taxi permits issued by the Milwaukee citygovernment are property, but have not been "taken," as theydo not confer on the holders a property right in, amountingto control over, all transportation by taxis and taxi substitutes(such as Uber) in Milwaukee.

And then he basically says "welcome to a market economy, cabbies":

Undoubtedly by freeing up entry into the taxi businessthe new ordinance will reduce the revenues of individualtaxicab companies; that is simply the normal consequence ofreplacing a cartelized with a competitive market. But theplaintiffs exaggerate when they predict ruination for themselves.Buses and subways and livery services and other taxisubstitutes have not destroyed the taxi business; nor has Uberor Lyft or the private automobile or for that matter the bicycle.Taxicabs will not go the way of the horse and buggy-at least for some time.

That's from the case against Milwaukee. The Chicago ruling is pretty similar:

All seven of the plaintiffs' claims are weak. The first isthat allowing the TNPs into the taxi and livery markets hastaken away the plaintiffs' property for a public use withoutcompensating them. A variant of such a claim would havemerit had the City confiscated taxi medallions, which are thelicenses that authorize the use of an automobile as a taxi.Confiscation of the medallions would amount to confiscationof the taxis: no medallion, no right to own a taxi, ...though the company might be able to convert the vehicle toanother use. Anyway the City is not confiscating any taximedallions; it is merely exposing the taxicab companies tonew competition-competition from Uber and the otherTNPs.

"Property" does not include a right to be free from competition.A license to operate a coffee shop doesn't authorizethe licensee to enjoin a tea shop from opening. When propertyconsists of a license to operate in a market in a particularway, it does not carry with it a right to be free from competitionin that market.

Posner doubles down on just how dumb this argument is by the cab companies:

Taxi medallions authorize the owners to own and operatetaxis, not to exclude competing transportation services.The plaintiffs in this case cannot exclude competition frombuses or trains or bicycles or liveries or chartered sightseeingvehicles or jitney buses or walking; indeed they cannotexclude competition from taxicab newcomers, for theCity has reserved the right (which the plaintiffs don't challenge)to issue additional tax medallions. Why then shouldthe plaintiffs be allowed to exclude competition from Uber?To this question they offer no answer.

All that the City gives taxi"medallion owners is the rightto operate taxicabs in Chicago.... That isn't a right to exclude competitive providersof transportation.

Perhaps more importantly, though, Posner also shoots down the argument that it's unfair that Uber gets to operate under a different regulatory regime:

The plaintiffs argue that the City has discriminatedagainst them by failing to subject Uber and the other TNPsto the same rules about licensing and fares (remember thattaxi fares are set by the City) that the taxi ordinance subjectsthe plaintiffs to. That is an anticompetitive argument. Itspremise is that every new entrant into a market should beforced to comply with every regulation applicable to incumbentsin the market with whom the new entrant will becompeting.

Here's an analogy: Most cities and towns require dogsbut not cats to be licensed. There are differences between theanimals. Dogs on average are bigger, stronger, and more aggressivethan cats, are feared by more people, can give peopleserious bites, and make a lot of noise outdoors, barkingand howling. Feral cats generally are innocuous, and manypet cats are confined indoors. Dog owners, other than thosewho own cats as well, would like cats to have to be licensed,but do not argue that the failure of government to requirethat the "competing" animal be licensed deprives the dogowners of a constitutionally protected property right, or alternativelythat it subjects them to unconstitutional discrimination.The plaintiffs in the present case have no strongerargument for requiring that Uber and the other TNPs besubjected to the same licensure scheme as the taxi owners.Just as some people prefer cats to dogs, some people preferUber to Yellow Cab, Flash Cab, Checker Cab, et al. They preferone business model to another. The City wants to encourage this competition, rather than stifle it as urged by theplaintiffs, who are taxi owners.

And, later:

There are enough differences between taxi service andTNP service to justify different regulatory schemes, and theexistence of such justification dissolves the plaintiffs' equalprotection claim. Different products or services do not as amatter of constitutional law, and indeed of common sense,always require identical regulatory rules.... If all consumers thought the serviceswere identical and that there was therefore no advantageto having a choice between them, TNPs could neverhave gotten established in Chicago.

There are all sorts of arguments people can make about whether or not companies like Uber and Lyft are good (and I'm a fan of them), but arguing that they're "taking property" away from cab medallion holders is not a legitimate argument.

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