Ridesharing Regulation Foundations with Karen Moury

In part one of our Ridesharing Regulation series, Kenton Steele is joined by Karen Moury of Eckert Seamans law firm. Karen discusses her firsthand experience representing Uber and working with the Pennsylvania Public Utility Commission to create the state's first set of ridesharing regulations in 2014.

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KHS    Kenton H. Steele, Esq.

KOM   Karen O. Moury, Esq.

Kenton

            On today’s podcast, we’ll be joined by our special guest, Karen Moury. We’ll be discussing some of the common issues and background information on ridesharing regulations.  Karen, can you please introduce yourself to our listeners?

Karen

            Certainly. I’m Karen Moury, an attorney with Eckert Seamans Cherin & Mellott.  I’m based in Harrisburg, Pennsylvania.

Kenton

            Karen, I know that you’re a real wealth of knowledge as it relates to ridesharing regulations and the background information as to how these regulations came about.  Can you tell us a little bit about how you first became involved in this process?

Karen

            Sure, the way I got involved in this process—it started about three months after I had entered private practice in 2014, and that was following a lengthy career in Pennsylvania state government with most of it being at the Pennsylvania Public Utility Commission, and in fact, although the PUC regulates many different industries, including electric and natural gas, my first area of focus when I got to the PUC was transportation. I did that for about six years, so I’m very familiar with the transportation industry and the way it’s regulated. Then also, because of my subsequent positions at the PUC, I had a lot of relationships with staff and I understand how the process works pretty much throughout the agency. The firm that I was working with was already doing government relations work for Uber, and I had the opportunity to pitch my experience and to hopefully represent the company on legal regulatory matters. Uber hired us for that purpose, and they wanted us to help them either become exempt from PUC regulations or become authorized to legally provide services in Pennsylvania. We ended up filing an application for statewide authority in April of 2014. While that was still pending, it was taking longer than anticipated, so while it was still pending, we filed an emergency temporary authority application just to serve in Pittsburgh because that was the focus of the company’s business at that time.  That application is called an ETA application.  It’s provided for under the PUC’s regulations, and that was approved within a few weeks. Uber became legal to operate in Pittsburgh in August of 2014, and then later that year, the PUC approved the statewide authority. By January 15th, Uber was able to operate legally throughout Pennsylvania, and in fact, the first day Uber launched in Harrisburg where I live, I requested a trip.  I didn’t have anywhere to go, but I asked the driver to take me to the mall.  I spent about 15 minutes there.  I came out and requested a driver. It was the same guy because he hadn’t gone very far.  It wasn’t being heavily used then, but it’s very popular in Harrisburg now.

Kenton

            Okay, that’s very interesting.  So it sounds like you’re very much, were in on the ground floor in a very significant way as it relates to these companies getting started.  As I said, you’re a real wealth of knowledge as it relates to regulatory issues and ridesharing.  Can you explain a little bit for our listeners - what entity and who is generally responsible for oversight of ridesharing companies?

Karen

            The oversight of ridesharing companies really does vary across many jurisdictions.  There are some states that really do all of their regulation of transportation at the local level, but there are also many, many jurisdictions that regulate transportation at the statewide level.  Uber and TNCs generally prefer the model that is statewide because they want to see the consistency across the state. There was a lot of lobbying for statewide legislation to address TNCs, and quite a few states have adopted statewide legislation. And as I mentioned, it’s a lot easier for TNCs to comply with the law if it’s the same across the state, and in fact, it even can get a little challenging for them when they are operating significantly around the border of a state. New Jersey, Delaware, Maryland, all are neighboring states of Pennsylvania, and if you’re in that area, you have to become familiar with more than one set of rules, and often when the statewide legislation is enacted, it tells local government what they can or can’t regulate.  Some state laws actually say we’re the controlling authority and local government can’t do anything.  They can’t impose any additional burdens on TNCs, but then other states will allow at least for the imposition of fees and maybe some rules by airports. Then there are other states that just say, here’s our rules if you’re going to have TNCs, but local governments get to decide whether you want to regulate them or ban them.  Then one other thing I wanted to point out about this, is that there is a lot of different ways that the states fund the oversight responsibilities.  The three main ways are:  (1) they just do it through permit fees. When they apply for the permit, they have to pay a fee, and that fee is intended to generate the revenue that’s needed to oversee their operations. Then another common way is through an annual regulatory assessment, and that would usually be based on something like revenues or the number of trips that they provided. Then one other somewhat common model is using civil penalties so that when they enforce the rules against TNCs who may have violated them and they collect civil penalties, they use that to fund the whole oversight.

Kenton

            Very interesting.  It’s something we have discussed a little bit on this show a few times that there is certainly this patchwork of regulatory bodies, state and local, different, again, regulatory bodies in each state that each have something to say about how these companies operate. There’s certainly a lot to deal with there for these companies.  Just to get a better picture on some of those issues, can you walk us through what happened in Pennsylvania when you became involved in the process. How did they get to the point where they reached adopting statewide regulations and what it looked like for the companies that were looking to get involved in that space?

Karen

            When I first got involved in Pennsylvania’s regulatory process, the Commission, the Regulatory Utility Commission that oversees this in Pennsylvania, and the PUC was still trying to figure out even if it had jurisdiction over TNC services because the TNC companies were saying that it didn’t, so they were still looking into that.  Then on the second part of it, and if so, how are they going to fit TNCs into this traditional regulatory framework? The PUC had been regulating taxicabs for over a century and they knew how to do that. They paid a lot of attention to the adequacy and the reliability and the safety of their service. They made sure they were charging just and reasonable rates. They had an application process that could be cumbersome, but it was designed to make sure there was a public need for this service, that these carriers were technically fit, financially fit and that there wouldn’t be an adverse effect on existing carriers.  But what the PUC was quickly realizing is that TNCs didn’t really fit into any of those pockets because they really rely on the competitive market to dictate how they’re going to address their operations. The big part of that is consumer satisfaction. What is it that the consumers want? If they want it, we’ll give it to them, but we don’t want to give them something just because you, the regulator, thinks that they need it. Meantime, on the other side of town, the taxicabs were clamoring to have the same burdens and standards and requirements imposed on TNCs as they were subjected to, but as the PUC was learning, those didn’t seem to be applicable to TNCs, so the agency really had to step up and figure out how to do this. The one thing that really helped the Pennsylvania PUC is that they already had on their books—nobody really remembers the reason—but they already had on their books a special certificate or license for experimental service authority. It was interesting that there was just no one who had any idea where that came from. It had been in the books for years, but what the Commission was able to do is use that to develop more like temporary regulations, rules, through orders that would apply to the TNCs, and that really allowed the PUC to embrace this transformation of the transportation industry.

Kenton

            In looking at how these things came about and how this process worked, were the TNC companies already operating in Pennsylvania when the regulatory process got started?

Karen

            I think those things started happening around the same time. I mean, I think the TNCs were talking to the PUC about what their plans were and they were trying to convince them that they didn’t need to regulate them, so there were interactions already happening before operations started, but nothing official was filed with the PUC or was pronounced by the PUC before both Uber and Lyft started operating in Pittsburgh in February 2014. They seemed to both have reached a point where they didn’t think they were going to talk the regulators into their way of this oversight framework, so they just launched their operations. Then while the Uber and Lyft applications for statewide authority were pending at the Commission, the Commission’s own independent Bureau of Investigation and Enforcement filed complaints against both Uber and Lyft and sought cease and desist orders, and the whole reason they didn’t think that they had done anything unsafe or that was really a cause for concern, but just the fact that they were operating without any kind of license.

Kenton

            At the time that regulators did become involved, what were some of the primary concerns as far as things that need to be covered by regulations?  What issues were at the forefront of what needed to be addressed?

Karen

            What the Commission—and we saw this in other states, too—when we looked into how that rolled out, say in California, Colorado, DC, some of the other early adapters, what the regulators were all finding is that this innovation is great.  We love what technology is doing and how it’s improving the transportation services that are available to the public, but that doesn’t alter our obligation to protect public safety. These are still going to be vehicles being used to transport passengers around the state, and we need to make sure that we are doing our job, that the laws imposed on us for 100 or more years.  What many of the agencies did, and Pennsylvania was definitely included in this: they really sought to strike a proper balance between safety and allowing innovation, so they established some very basic safety nets that they were convinced would not stifle innovation.  The three main areas that they focused on were insurance, driver integrity and vehicle safety. I think that the one, the only one that the TNCs were resistant on to some extent was the insurance.  Of course, the TNCs have a lot of insurance. They have more than any taxicab company ever had, but there was a big debate at the beginning about whether the TNC could rely on the drivers’ insurance during the time that they were, maybe had the app on and they were just driving around waiting for a trip. But the regulators felt very strongly, no, you’re still driving in public, on public highways and roads, and we want you to have primary responsibility from the minute the app goes on. Now, they did establish different levels for if the app is just on vs. you’re on your way to pick up a ride or you have a rider in your vehicle.  The levels are different, but that was the one thing that the regulators were pretty consistent about and later that got picked up in statewide legislation as well.  Driver integrity, that was obviously very important.  They were going to be allowing members of the public to enter vehicles driven by personal drivers, not professional drivers.  They hadn’t been, they weren’t under the kind of control, really much of any control, the way that taxicab drivers are by the taxicab companies. Some of the main things that they require the TNCs to do, which they were already doing but maybe they finessed it a little to be specifically the way they wanted it, but it was making sure you have a zero tolerance policy so that there can’t be any drug or alcohol use. If a passenger even suspects it, that driver has to be removed from the platform pending an investigation. The other big one, obviously, was criminal background checks.  Now there’s a lot of different ways to do those, and we see a lot of different requirements throughout the country for what they look like, but the key there was just that you had to do it before you could let the driver operate or make one trip. A big part of the criminal background check was the sexual offender or sex offender registry. That’s almost universal throughout the country to this day that if you’re on that registry, you’re never going to be a TNC driver. The third component they looked at was the driver history records. You know, you just had to make sure that over the past few years that this driver hadn’t had an extremely poor record of committing major moving violations or DUIs or anything like that. And then some of the other things were just more related to the app and the platform itself, and that was just that, not so much on the drivers but making sure that you’re giving passengers a way to identify the drivers on the app, and then the use of placards so that if the rider is waiting for the vehicle and sees a vehicle that sounds like it’s right, there’s at least a placard on it so that signifies to the passenger that that’s the TNC vehicle they’re waiting for.

Kenton

            Alright, well, Karen, thank you very much for joining us today.  That’s going to conclude this discussion on the Reminger Report Podcast on Emerging Technologies.  Please join us in our next episode where we’ll continue our discussion with our special guest, Karen Moury, regarding ridesharing regulations and not only how those regulations work, but also how they came about, why they were put in place and the concerns that they are designed to address. With that, we thank you again for joining us and hope that you will join us again for our next episode of the Reminger Report Emerging Technologies Podcast.