After Michael Cohen pleaded guilty of hiding $4 million worth of income from authorities, the Newyork Taxi and Limousine Commission has ordered him to divest his ten medallions in less than two weeks.
The regulator threatens to revoke the medallions if Cohen does not meet this deadline. They also added that regulations are clear on this issue – people with criminal records can not own medallions.
Cohen bought the medallions in the 1990s for an undisclosed price according to TLC. At the time, they were selling at an estimated cost of $5,000 – give or take. However, the price hit $1.2 million in 2011. And that saw a good number of medallions change hands.
After ridesharing entered the scene in 2009, medallion prices have been declining at an alarming rate. People are now selling them for less than $200,000, attributed by the surge in Uber operators. For a long time, there were roughly 13,000 taxis in Newyork streets. Now, Uber has introduced more than triple that number and Cohen and other investors have to deal with that.
It’s not clear how Cohen dealt with this situation, but it’s definitely a big blow on his investment portfolio.
The traditional taxi business is plummeting, and it’s not because of ridesharing.
Uber, Lyft and other ridesharing apps are enjoying what some would call “overnight success” for a good reason. They’ve found a way to avoid those burdensome taxi regulations to make the industry nicer for everyone.
Investors can now get into the business without having to take another line of credit to pay for medallions and cars. A medallion costs more than $200,000, and a brand new vehicle goes for anywhere between $10,000 and $20,000. That explains why taxi companies own most yellow cabs.
The industry has also placed many requirements around the taxi business. Besides the paint job, you also have to install a panic button, taxi meter, card reader and a radio. When you add that to licenses, insurance, maintenance, and other sundry expenses, it’s clear that running a traditional taxi business is not cheap.
Joining Uber, on the other hand, is as simple as passing an inspection and downloading an app. And that makes it extremely hard for traditional taxis to compete with the free market. Therefore, it safe to say the taxi industry is drowning itself with regulations.
Most young people prefer ridesharing services to traditional taxis – for a good reason. They are convenient, affordable and downright innovative.
However, not everyone shares that sentiment. Some jurisdictions just can’t see sense in crippling an entire industry to please riders or service providers. They prefer replicating the innovation and using it with the cabbies on the ground.
So here are some places where Uber has been banned or has voluntarily walked away after legal battle.
Three US States
Austin – as ironic as it might seem, Uber is facing legal action in over 20 states. The most notable one being Austin, Texas where the company decided to pull out after a juristic disagreement in 2016.
Alaska – this state also had a problem with Uber’s business model, and that lead to a courtroom battle that ended in Uber paying $77,925 in fines. The company later exited the market altogether.
Oregon – this west coast state also slapped a ban on ridesharing services, but with an exception for Portland.
Four Countries in Europe
Bulgaria – Uber has also faced legal issues in Europe, with Bulgaria being the most visible case. The Supreme court of Bulgaria ordered the shutdown of Uber, citing that anyone looking to provide taxi services in that country should take on all the requirements.
Denmark also made taxi meters mandatory for all cabbies operating within her borders. And that saw the exit of Uber from that market.
London – The latest ban on ridesharing services was in London. The court claimed that Uber is not “fit and proper” for their market. But the start-up has vowed to fight back claiming that more than 40,000 Londerners depend on their services.
Newyork’s current taxi medallion system is failing. Driver-owners can barely meet lease agreements, and the price of medallions is teetering.
The entry of Uber, Lyft and other ridesharing services in Newyork come as a relief to aspiring cab owners and riders. But the city’s taxi industry is taking non of that. They recently engaged this free cabbie market in stormy legal battles.
Of course, the politically affiliated medallion owners got the upper hand. Alluding that everything was okay since 1930 until the ridesharing services arrived. Now, the value of this treasured medallions is plummeting.
There are roughly 13,000 taxi medallions in NewYork, and for a long time, they sold at $1 million and even more. Today, the same medallions are worth less than $200,000. And that has left many owners with steep loans which they cannot afford to service.
This inequity trickles down to riders too and that, in a way, fuels the cycle of debt. However, this problem is not going away soon. The city is tightening taxi regulation again, in an attempt to make a recap after almost running out of business.