Austin Police Crack Down on Ride-sharing Rules


Arcade City, , an Austin ride-share company
7 min read

Since the swift exodus of Uber and Lyft from Austin on May 9 over regulation disagreements (specifically a new fingerprinting-based background check requirement for drivers), several alternatives have cropped up in their stead. And while these other ride-share companies—some brand-new start-ups, some more established—find their footing in the Texas capital, the Austin Police Department is beginning to seriously enforce the city’s ride-share regulations.

Arcade City Hit By Sting Operations

Arcade City, whose founders’ aim to decentralize ride-sharing is truly peer-to-peer, use a Facebook group (that’s over 38,000 members strong) to help riders find drivers, and vice versa. This means no governmental oversight and, argues the city, no safety mechanisms (like the required fingerprinting), all of which have made them a target of law enforcement.

The city of Austin is cracking down on Arcade City with undercover sting operations, reports Tech Crunch. At the end of June, police ticketed and impounded the cars of four Arcade City drivers because city officials say the company and its drivers aren’t “playing by the rules,” says KVUE. And in July, police entered Capital Factory, a startup incubator where Arcade City had been renting office space, in search of CEO and Founder Christopher David. Austin Transportation Department officials were accompanied by police officers with plans to issue a citation—a class C misdemeanor punishable by a fine of up to $500—for operating a ride-sharing service without a valid permit. David was nowhere to be found. He has not been cited yet (as of July 18, 2016). A recent Medium post also brought to light his questionable past, including allegations of fraud.

Why is Austin going after Arcade City?

The problem, according to Marissa Monroy of the Austin Transportation Department, is that Arcade City drivers are compensated more than the federal reimbursement rate for privately owned vehicles (which applies to vehicles not documented by the city—a documentation process that caused Uber and Lyft’s departure), which is just 54 cents a mile. Arcade City is therefore operating illegally, says the city. Victims of the sting were cited for not having a valid chauffeur’s permit and for having no operating authority. The cost to get their vehicles out of impound was over $200, and drivers also received several tickets, each more than $500.

The founder of Arcade City told KVUE that he plans to pursue legal action against the city of Austin. Arcade City argues that since they don’t employ anyone as a contractor or otherwise (both drivers and riders find each other on Facebook, and no money changes hands between drivers and Arcade City as the company takes no cut of the fares), they shouldn’t be subject to regulations.

The city apparently has no plan to stop enforcing ordinances, to which they firmly believe Arcade City should adhere, so drivers for Arcade City continue to be at risk of tickets and impounding. Arcade City, for their part, doesn’t plan to adhere to the City’s background check and fingerprinting ordinances. They haven’t launched their ride-share app yet (scheduled launch date is late August), and it seems their drivers will still be at risk then since Arcade City doesn’t plan to adhere to city ordinances with their app either. As of now, Arcade City hadn’t said how they plan to make money, but if they do eventually take a cut from drivers, their argument for exemption from city regulations would no longer hold up.

Arcade City, an Austin ride-share company
Photo Credit: Arcade City

The State of Other Ride-sharing Companies

The half-dozen or so other ride-share companies that have sprung up in Austin since the departure of Uber and Lyft are all approved by the City of Austin to operate within its limits, unlike Arcade City. Each ride-share alternative operating in Austin, including GetMe, Fare, Fasten, zTrip, Wingz, RideAustin, and the newly-launched InstaRyde, explicitly states it will comply with the city’s fingerprinting rules.

So far, there haven’t been any reports of sting operations aimed at other ride-share services, but as the fingerprinting-based background check laws ramp up (50 percent of a company’s drivers must be fingerprinted by August 1, and 99 percent must be fingerprinted by February 2017), we might see more police intervention with non-complying companies.

As The Daily Texan reports, the city just passed a follow-up to the original ordinance. Now, the city will begin fining ride-share companies that don’t comply with the fingerprinting-based background checks but are otherwise approved by the city. Companies must submit monthly reports verifying their adherence to the fingerprinting-based background checks; otherwise they’ll incur a fee of $500 each day. And, if companies don’t meet the 99 percent threshold in February of next year, they’ll have their operating licenses revoked (after a three-month grace period), potentially leaving them open to police action like Arcade City drivers experienced.

Overall, it seems the city’s biggest problem is with Arcade City, as they are the only company currently operating without city approval.

Consequences of New Ride-share Laws

There are fewer than one thousand traditional cabs available to serve the more than one million residents of the city of Austin, reports the Independent Women’s Forum. As we’ve written, one of the biggest advantages of ride-share companies like Uber, Lyft, and their more modest cousins is the amount these services cuts down on drunk driving. Since the ride-share big guns departed in early May, the police department says DWI arrests are 7.5 percent higher than they were during the same period last year (when Austin had both Uber and Lyft).

The other ride-share companies operating in Austin may gain traction and may be able to fill the void left by Uber and Lyft, but until then, there are a lot of Austinites without an easy, safe way to get home safely after a night on the town.

uber app ridesharing

Where Austin Ride-sharing Stands Now

Uber and Lyft have made no moves to return to Austin, the city has made no moves to make its safety standards less stringent, Arcade City continues to be targeted by police, and the new ride-share alternatives continue to try to gain traction. As the summer wears on, and regulation requirements ramp up, we’re likely to continue to see strife between the city of Austin, ride-share drivers, and city residents looking for a ride.

One final note about a new ride-share alternative in Austin to get excited about: Drive Home, a service offered by Luxe, a San Francisco-based valet parking app. It’s essentially a valet service: customers (tired, inebriated) request a valet who drives them safely home, and the valet then finds his/her own way back. Drivers for Drive Home aren’t subject to the fingerprinting-based background checks because the drivers—that is, the valets—aren’t using their own cars, reports the Austin Business Journal. We’re looking forward to see if Drive Home’s business model catches on.