Uber: When Innovation Outpaces The Law

While a disruptive service can be created by a couple of geeks with laptops, laws are born within the snarl of slow bureaucracy. They need time to catch up.

Uber: When Innovation Outpaces The Law

Uber, an app that helps connect car drivers with people looking for a ride, has expanded to more than 15 cities since it launched in San Francisco two years ago. But is it legal? Depends who you ask.


Taxi and limousine authorities in San Francisco, Washington, D.C., Boston, and New York City have all started asking questions about Uber’s legality, often waving around cease and desist orders in the process. Yet the startup, having worked out these squabbles in one way or another, is still operating in all of the cities in which it has set up shop.

Its legality is simply not clear-cut. There are laws for taxis, which you hail on the street, and there are laws for limousines, which you call in advance. But until Uber came around and gave people the option to schedule cars with a moment’s notice from an app, there was no need for laws governing limousines that sometimes act similarly to taxis–or taxi-type cars that could be digitally hailed. The company operates in a gray area of its own invention.

“A lot of this regulation was written before mobile technology,” says Josh Mohrer, the general manager of Uber in New York City. “In a world where a black car can only be arranged by phone, and you’re calling a phone number and they’re going to radio to the car, and they’re going to come pick you up, and that whole process takes a half an hour.”

A disruptive service can be created by a couple of geeks with laptops, but new laws are born within the snarl of slow bureaucracy. It takes a while for them to catch up. Uber isn’t the only service that is caught in the disparity between the two timetables.

Car-sharing companies such as Getaround and RelayRides let neighbors rent their cars to each other, sometimes by the hour. But when it comes to deciding who should pay if one of those cars gets in an accident, the law is still unclear. A federal law protects car rental and leasing companies from liability in the case of an accident, but what about an individual who has rented her car? With no precedent, it’s hard to tell. Peer-to-peer room renting service Airbnb has also created a new category that lacks straightforward legislation. Earlier this year, San Francisco clarified that it expects the service to pay the same 15% tax hotels pay, something it hadn’t been doing. Meanwhile, landlords who prohibit subletting without their consent have taken legal action against tenets who post rooms on the Airbnb site.

The relationship between innovation and laws has always been this way. Vehicles were sold in the United States for years before the country got its first speed limit.
And airlines were already selling tickets to civilians by the time the first federal aviation act passed in 1926.


Figuring out exactly how a new service fits into existing laws is a cost of doing business when you’re disrupting an industry, and most companies accept that.

“We have found that when policy makers learn more about our business and the economic benefits our platform offers to cities and to individuals trying to make ends meet in this tough economy, they want to help,” Airbnb’s head of communications Kim Rubey tells Fast Company. “So our goal is to make sure we reach out and educate policy makers so that policies don’t inadvertently inhibit the growth of businesses powered by the burgeoning sharing economy.”

In Uber’s case, Mohrer says policies, though difficult to navigate, have not inhibited the company’s growth. They’ve hired no outside experts to navigate taxi codes, nor has this become the focus of anyone’s job. It’s been a menace, but most disputes are solved quickly.

“We’re in the technology business, not in the lawmaking business,” Mohrer says.

[Image: Flickr user Bob Vonderau]

About the author

Sarah Kessler is a senior writer at Fast Company, where she writes about the on-demand/gig/sharing "economies" and the future of work.