Uber, Grab, and the law

By Jay-r C. Ipac

THE Land Transportation Franchising and Regulatory Board’s (LTFRB) recent encounters with ride-sharing applications, Uber and Grab, generally drew flak from the public. While a compromise was eventually reached, questions on LTFRB’s power to regulate this new industry and on the government’s ability to keep up with technological change have surfaced once again.

Must the likes of Uber and Grab conform to the existing law or must the law adjust to technological innovation? This question reminds me of Judge Frank Easterbrook’s famed “law of the horse.” He cautioned lawyers from unduly carving out a new “field” of law just because of the perceived gray areas brought about by advances in technology. He said that the best way to learn the law applicable to specialized endeavors is to study general rules.

‘THE GENERAL RULES’
The authority to regulate the operation of public land transportation vehicles and grant franchises or certificates of public convenience (CPC) belongs to the LTFRB. A CPC is a government authorization to operate a public utility or a public service. The Supreme Court defines a public utility as a business or service engaged in regularly supplying the public with some commodity or service of public consequence. Its principal determinative characteristic is that of service to, or readiness to serve, an indefinite public or portion of the public which has a legal right to demand and receive its services or commodities. However, the act of offering services or goods that promote public good and serve public interest does not automatically make the business a public utility.

On the other hand, public service is defined as including “every person who owns, operates, manages or controls, for hire or compensation, and done for general business purposes, any common carrier…” Common carriers are those engaged in the business of carrying or transporting passengers or goods or both… for compensation, offering their services to the public.”

THE ‘ACCREDITATION’ OF UBER/GRAB
In response to the clamor of the taxicab operators for the regulation of Uber and Grab, the DoTr made a new classification of public transport service known as Transport Network Vehicle Service (TNVS). These refer to the Uber/Grab “partners”/drivers/vehicle. A Transport Network Company (TNC) is the entity “that provides pre-arranged transportation services for compensation using Internet-based technology application or digital platform technology to connect passengers with drivers using their personal vehicles.” Uber and Grab are the TNCs. The TNC’s business model, which capitalizes on disruptive technology, allows it to create this dichotomy in the transportation service.

TNCs are considered as Online-Enabled Transportation Service, relying on internet connection, mobile application, and geo-location technology. This means that their passengers are limited to those who use the application and have a registered account with the TNC. When a passenger requests a driver, the application pairs the passenger with an available and willing driver. The price in turn is determined by the TNC’s own computation and made known to the potential passenger.

If the TNCs merely pre-arrange the transportation service (so that passengers in need of a ride and drivers who are willing to render service can meet at a price set by the TNC itself), then arguably, the TNC is not operating a public transportation service. Hence, it is not a public utility. But, TNCs are required to accredit with the LTFRB so that the state can properly exercise its regulatory powers to promote public safety. This was also the view of the California Public Utilities Commission.

How about the TNVS?

In US v. Kutz (1916), the US Supreme Court refused to consider that part of a taxicab’s business which consists in furnishing automobiles from its central garage on individual orders generally by telephone, as a public utility. The TNVS may argue that they are similarly situated because their contract of carriage appears to be undertaken by special agreement and therefore the public has no legal right to demand its services.

However, the LTFRB does not see it this way.

While it described the TNC’s business as “[p]roviding pre-arranged transportation services” — and not merely providing the platform to pre-arrange the service — only the TNVS is treated as public utility. Yet, it required the TNVS to accredit with an accredited TNC and to maintain such accreditation in good standing in order to continue operating legally. In other words, the LTFRB considered the dichotomy in determining the extent of its authority even if, by its own definition, the TNC’s technology-enabled role in the process is indispensable in delivering the service.

The potential of new technologies to change the way we deal with our everyday affairs and its impact on existing legal understanding makes law and technology a very interesting topic. While the existence of “technology law” as a distinct legal field is debatable, developments in this area cannot be simply ignored as it continues to challenge our traditional legal understanding and the existing legal framework.

While state regulation of technology-driven businesses and activities at the administrative level is always viewed reluctantly, regulators (and even policy makers) can consider this as opportunity to innovate to deliver better public services within the confines of their mandate but at the same time carefully ensuring that fundamental rights are respected. Inasmuch as the law should not stifle innovation, the innovation if possible should also be able to mold itself under existing law.

Jay-r C. Ipac is a Senior Associate at DivinaLaw.