Making competition more difficult through regulation and licensing requirements in order to maintain standards is often just a cover for protecting certain industries from new competition.
That’s exactly what’s going on with the District of Columbia’s blocking of the ride sharing platform Empower. Service on the app has been suspended for a week as Empower complies with a D.C. Superior Court ruling. But while Empower will be back in court on Thursday, the D.C. Council and Attorney General are wrong to restrict Empower. Their action will ultimately hurt riders, drivers, and the broader local economy. At a time when transportation costs are rising and urban mobility is increasingly dependent on flexible, app-based services, restricting competition in ride sharing is terrible policy.
Empower’s operating model differs from the dominant ride app companies Uber and Lyft. Instead of taking a large commission from each ride, up to 20% to 50% of each ride, Empower charges drivers a subscription fee of around $50 a month. Under this model, drivers keep more of their earnings. This model has the potential to increase driver income while also lowering prices for riders. Typically, an Empower ride is 20% cheaper than a ride with Uber or Lyft. Sometimes it is more than 50% cheaper. By preventing Empower from operating, however, regulators are effectively protecting incumbent firms and limiting the emergence of alternative business models that could benefit consumers.
There is a strong case that the crackdown reflects regulatory capture. Established ride hailing companies have both the resources and incentives to lobby for rules that raise barriers to entry. When regulators consistently act in ways that benefit existing firms while excluding challengers, it raises questions about whose interests are really being protected.
The most immediate impact of the ban is reduced competition. Fewer competitors in the market will result in higher prices and less innovation. Ride sharing has already transformed transportation in cities like Washington, D.C., by increasing convenience and reducing wait times. But that progress depends on continued competition. When new entrants are blocked, incumbents face less pressure to improve service quality or reduce fares.
Drivers are likely to lose out. Many drivers are complaining about declining earnings on the Uber and Lyft platforms. Drivers say that commissions take too large a share of each fare. Empower’s subscription based approach offers an alternative that improves driver take home pay and provides greater financial stability. Removing that option reduces drivers’ bargaining power and limits their ability to choose the platform that best meets their needs. Drivers would not choose Empower if the subscription model did not increase their take home pay.
New research indicates that when government increases regulations and mandates higher wages for gig workers, prices for consumers rise, overall employment falls, and wages for gig workers either remain the same or fall. Higher prices reduce demand, and higher mandated wages reduce hours worked because consumers choose lower cost alternatives, public transportation for example. The consumer loses; no one wins.
There is also a broader policy concern. Overly restrictive regulation can signal to entrepreneurs that already tax-heavy Washington, D.C. is not open to new ideas. Cities that embrace competition and experimentation tend to attract investment and talent. Those that rely on protectionist policies risk falling behind.
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None of this means that ride sharing platforms should operate without oversight. Basic safety standards, insurance requirements, and consumer protections are essential. But there is a clear difference between reasonable regulation and outright exclusion. Policymakers should aim to create a level playing field, not pick winners and losers in the marketplace.
Stopping Empower from operating in Washington, D.C., is bad policy because it reduces competition, harms drivers, and limits consumer choice.
James Rogan is a former U.S. foreign service officer who later worked in law and finance for over 30 years. Now he writes a daily note on markets, economics, politics and social issues.
