BILL ANALYSIS: New Regulations for Uber

H.3525 bears many similarities to H.3413 and S.409, two other bills introduced this session to create a regulatory framework for transportation network companies (TNCs), that is, companies that provide personal transportation arranged by a digital network (Uber, Lyft, Sidecar, et al.). Despite their similarities, H.3525 is awaiting the governor’s signature while H.3413 continues to sit in committee. This isn’t too surprising, however, given the fact that Rep. Bill Sandifer (R-Oconee) is the primary sponsor of H.3525, and is also the chairman of the Labor, Commerce, and Industry Committee, the House committee to which both H.3525 and H.3413 were assigned.

Like H.3413 and S.409, H.3525 would exempt TNCs from having to obtain a class C certificate from the Office of Regulatory Staff (ORS), as is required for traditional taxicab companies. Instead, TNCs would be required to obtain a special TNC permit from the ORS.

In order to obtain a permit and operate in South Carolina, TNCs and their drivers would have to comply with a number of regulations. Many of the regulations laid out in H.3525 are similar to those required by H.3413 and S.409 for licensure. These regulations include:

  • When logged in to a digital network but not carrying passengers, TNC drivers must have insurance which covers “at least fifty thousand dollars for death and bodily injury per person, at least one hundred thousand dollars for death and bodily injury per incident, and at least fifty thousand dollars for property damage.”
  • When carrying passengers a TNC driver must have automobile liability insurance that covers at least $1,000,000 in potential damages.
  • If a vehicle that is to be used to provide TNC services has a lien against it, the TNC driver must notify the lienholder of the proposed use of the vehicle for TNC services.
  • Vehicles to be used for TNC services must pass a yearly safety inspection conducted by a certified mechanic.
  • A TNC vehicle must display a consistent and distinctive signage or emblem at all times when the TNC driver is active on the TNC digital platform or providing TNC service. (Think taxi emblems on the roof of taxis, although in TNC vehicle cases the emblem may be magnetic or removable)
  • TNCs must conduct driver background and qualification checks and may not allow a driver to provide services if they:
    • are under 21,
    • are under the influence of drugs or alcohol,
    • are a registered sex offender,
    • or have been convicted in the last 10 years of DUI, fraud, use of a motor vehicle to commit a felony, a felony crime involving property damage, theft and crimes as defined as violent pursuant to state code 16-1-60
  • TNCs can’t accept street hails or cash payments.
  • TNCs must have non-discrimination policies and must provide service in compliance with all applicable laws for providing services to persons with physical and mental disabilities.
  • TNCs must make available to prospective passengers the method by which they calculate fares and an estimated fare.
  • TNCs must provide electronic receipts.
  • A TNC shall maintain driver qualification records, vehicle inspection records, and individual trip records for a period of three years.
  • TNCs shall not disclose passenger’s personally identifiable information to 3rd parties with limited exceptions (such as legal obligations, or if the passenger consents).

Thanks to a Senate amendment the bill would also impose multiple fees on TNCs along with burdensome reporting and audit requirements.

Senate amendments would require TNCs to track where their drivers are providing transportation and collect a “local assessment fee” on each ride provided by a TNC driver equivalent to one percent of the gross trip fare. At the end of each quarter TNCs will be required to submit to the ORS the local assessment fees it has collected, and records indicating the number of trips and percentage of gross trip fare that originated inside of each municipality, and the number of trips and percentage of gross trip fare that originated outside of municipalities.

After receiving the assessment fee revenues the ORS will distribute the revenues to municipalities using the trip data provided by TNCs. Fee revenue from trips that originated inside a municipality will be distributed to that municipality, and fee revenue from trips that originated outside a municipality will be distributed to the county where the trip originated.

Further, a municipality may request that the ORS inspect a TNCs records to ensure the proper amount of fee revenue is being remitted. The ORS may carry out such an inspection once a year, and before it is carried out the ORS must notify the Municipal Association of South Carolina (MASC). Upon notification of an inspection the MASC may further request a TNC hire an independent third party auditor to further verify that fee revenues are being properly distributed. Once completed the TNC must provide the audit report to the MASC. In the event the report is inaccurate the ORS “shall correct the underpayment and overpayment by offsetting the amount of the underpayment or overpayment in subsequent local assessment fee distributions.”

Any records maintained by the TNC to meet this local assessment requirement that are obtained by a public body will not be subject to FOIA.

The fully amended conference bill would also prevent political subdivisions from imposing taxes on TNCs except for business license taxes that are limited to receipts or revenue that are not subject to a local assessment fee.

Finally, TNCs would (along with every entity the state labels a utility) be assessed a regular fee in proportion to their gross income from operation in South Carolina, in order to finance the regulatory activities of the ORS.

H.3525 would create a pathway for TNCs to operate legally in South Carolina, and for that reason the bill could be considered an improvement over current law. However, under the new proposed law TNCs (while still facing a heavy regulatory burden of their own) would maintain a number of legal advantages over taxi cabs. Compared to taxi cab companies, TNCs would face an easier path to initial licensure that allows for less obstructionism by competitors, and TNCs would not have their prices dictated by regulators. The bill would also subject TNCs to fees that seem to serve the sole purpose of buying political support by providing local governments with more revenue.

There is a simpler regulatory approach that could both protect consumers and allow them the benefit of unrestricted competition in the personal transportation industry. This approach, laid out by SCPC, would be to repeal existing motor vehicle carrier regulations – certification requirements and price setting, for example – that don’t affect consumer safety. Using this approach would establish a level playing field between taxi cabs and TNCs, and would allow consumers to fully express their preferences between two unhindered industries.

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