May 8, 2016
Uber, Lyft Intend To Leave Austin After Disappointing Prop 1 Results

Ride-sharing companies Uber and Lyft are leaving Austin, Texas, over strict rules enacted by the city late last year. On Saturday, voters in the Texas capital rejected a proposal named Proposition 1 that would have allowed the companies to self-regulate their drivers.

Prop 1 results showed 56 percent of voters opposed the idea and 44 percent agreed with it. If the initiative had been approved, it would have overturned current rules set in place by Austin's City Council that subject Uber and Lyft drivers to background checks and fingerprinting.

"The people have spoken tonight loud and clear," Austin Mayor Steve Adler said in a statement.

Prop 1 fails to pass in Austin.
Uber and Lyft lost their two-year battle with the city of Austin over proposed driver regulations. [Photo by Spencer Platt/Getty Images]

According to a Lyft statement released Saturday night, the company is pulling out of Austin by Monday.

"Unfortunately, the rules passed by City Council don't allow true ride sharing to operate. Instead, they make it harder for part-time drivers, the heart of Lyft's peer-to-peer model, to get on the road and harder for passengers to get a ride. Because of this, we have to take a stand for a long-term path forward that lets ride sharing continue to grow across the country, and will pause operations in Austin on Monday, May 9th."

Uber followed with their own statement from Chris Nakutis, the company's general manager in Austin.

"Disappointment does not begin to describe how we feel about shutting down operations in Austin. We hope the City Council will reconsider their ordinance so we can work together to make the streets of Austin a safer place for everyone."

In December, the city council approved an ordinance requiring ride-sharing service drivers to submit fingerprints for a background check, much the same way as taxi drivers in the city. With the help of Ridesharing Works, Uber and Lyft responded by gathering 65,000 signatures on a petition to reverse the ordinance.

With that many signatures, the city was forced to either accept the proposal or hold a special election so voters can decide. The city chose the election route and Proposition 1 was born.

The new initiative would have replaced the city's current rules by removing the fingerprinting requirement. Prop 1 also cancels the obligation that Uber and Lyft drivers display a "distinctive emblem" on vehicles and allows passengers to load and unload in a travel lane.

Uber and Lyft spent more than $8 million in an effort to support Proposition 1. The companies created mailers and television ads, went door-to-door, and even offered free rides to voting places. Meanwhile, one group that opposed Prop 1 only spent $100,000 in its campaign to stop the measure.

The companies were so zealous in their efforts, a class-action lawsuit was filed against Uber over excessive "robo-text messages" sent to customers. A grievance was even sent to the Federal Communications Commission complaining about the messages.

Uber and Lyft want to self-regulate drivers in Austin, Texas.
Lyft and Uber say driver background checks by the city are unnecessary. [Photo by Mike Coppola/Getty Images for Lyft]

The ride-hailing companies maintain that driver background checks by the city are redundant. Both Uber and Lyft already have security policies in place to protect customers.

However, opponents of Prop 1 argue city-controlled checks are safer. They believe Uber and Lyft's campaign against the current rules is an attempt to influence the city through deceptive advertising.

"We, unlike Uber and Lyft, do not have access to millions of dollars," said Austin Mayor Pro-Tem Kathie Tovo in April. "Uber and Lyft are running a deceptive campaign in a blatant attempt to confuse the voters and allow corporations to write their own rules."

Austin is not the only Texas city that has placed stricter rules on drivers. Houston also recently approved regulations that require drivers be subjected to a fingerprint background check. Galveston and Corpus Christi also have strict regulations.

While both companies threatened to shutter operations in Houston, Uber decided to stay, at least for now. Uber has publicly announced a pullout if the directives are not repealed, whereas Lyft has already left.

The Prop 1 results in Austin were closely watched across the nation as other cities, like Los Angeles and Miami, are also trying to decide how they want to regulate Uber and Lyft as well.

[Photo by Pablo Blazquez Dominguez/Getty Images]