Saturday, May 7, 2016

Toronto Sells Out to a Taxi Company: A Lesson in Crony Capitalism

First, let's start with the definition of crony capitalism from Wikepedia:

Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. It may be exhibited by favoritism in the distribution of legal permits, government grants, special tax breaks, or other forms of state interventionism.

To continue this exploration, let's imagine there is a new taxi brokerage in town. Let's call it, "Crony International Taxi."

The other Toronto taxi brokerages will be called Taxi A-n. (n = 1, 2, 3, 4, etc.)

Next, we will consult the new taxi brokerage's driver's FAQ, to use Crony International Taxi's own words in describing the tilted playing field John Crony (not his real name,) promised to deliver when he said he was working to "level the playing field," between locally owned and operated taxi brokerages and the aforenamed corporate behemoth. Remember, when a politician says something, reverse the meaning to interpret his actual intent. Using this tried and true technique you will see that Mr. Crony made his intentions clear from the very beginning.

From the new Crony International Taxi broker's website:


Toronto Regulations: FAQs May 4, 2016

When will the regulations take effect?

The regulations do not take effect immediately. The implementation date is likely to be months away. Until then, operations will continue in Toronto in order to provide riders with reliable and affordable transportation. We’ll notify you of any important dates as the implementation draws closer.

Unlike Taxi A-n, Crony International Taxi is able to operate in defiance of the regulations that apply to all other brokerages. If Taxi A-2, for example, were to dispatch taxi rides to individuals without taxi licenses, using their own personal vehicles to carry paying passengers, Taxi A-2 would be immediately fined and ordered to bring its operations into compliance with existing laws. Failure to comply would result in escalating threats and fines. Continued non-compliance would eventually result in a heavy crackdown by law enforcement personnel until Taxi A-2 either complied or was driven out of business.

What makes Crony International Taxi different from Taxi A-n when it comes to law enforcement?



Will drivers need a special license to operate?

Drivers will not need a special driver’s license to operate. Crony International Taxi will be licensed as a Private Transportation Company (PTC) and we will supply a list of active drivers to the City on a frequent basis. Drivers who pass Crony International Taxi’s screening process (unrestricted G license, clear background screening and passed vehicle inspection) will be granted a City license to operate as a PTC driver.

All of the other brokerages will be required to use taxi drivers that have been licenced and approved by the City of Toronto, and who have paid an expensive fee (currently $329.43 per year.) Cab drivers for the Crony International Taxi brokerage will be exempt from that requirement.


Will the City impose fees?

Crony International Taxi driver-partners will not have to pay any licensing fees directly to Crony International Taxi or the City. However, there will be a fee of 30 cents per ride that will be added to the total fare and paid by your riders. Crony International Taxi will collect and remit this fee to the City.

This could actually add up. In the Toronto area, Crony International Taxi is reported to provide about six million rides per year. That would result in about $1.8 million dollars in fees for Toronto, about half the amount paid by the other Toronto taxi brokerages.

This is likely to change over time with the new two-tiered taxi bylaw. Crony International Taxi will continue to grow as the rest go out of business. Surprisingly, this scenario gets a lot of applause from libertarians who equate crony capitalism with free-market capitalism.


Will there be mandatory training for drivers?

There is no mandatory, City-administered training for drivers, but Crony International Taxi will continue to offer educational videos online.

"Educational videos online."

The City of Toronto has decided to scrap its mandatory 17-day training program for drivers hired by the other brokerages in order to make it look like they are actually levelling the playing field between Crony International Taxi and the rest. In truth, the city is finally admitting that its 17-day training program was a fraud from the start.

According to Sunil Johal, policy director at the University of Toronto's Mowat Centre School of Public Policy and Governance,

"A lot of people felt they weren't getting good service from drivers who were going through that training service anyway."

Taxi driving isn't rocket science. There should never have been such a course in the first place. Even so, before Crony International Taxi blew into the Toronto taxi market it would have been impossible to convince Toronto city council to abolish it.

What made the difference?



How will vehicle insurance work?

We have been working closely with Intact Financial to develop a new and innovative insurance plan for ridesharing that will meet the City’s new requirement. This insurance plan is undergoing regulatory approvals by the provincial insurance regulator. If approved, this insurance program will be held by Crony International and provide commercial insurance coverage on all Crony International trips. In the interim, every Crony International ride in Canada continues to be covered by auto liability insurance with Crony International’s current insurance provider.Crony International maintains insurance for bodily injury and property damage to third parties and we also have a well-established claim notification process.

In other words, Crony International Taxi can have the best of both worlds. It can continue to operate while claiming it has "insurance for bodily injury and property damage to third parties" at the same time as it wheels and deals with Intact Financial to develop a new insurance product to do .... to do what?


Will my car qualify?

The City will impose a vehicle age cap of 7 years, which will not take effect immediately. For now, all vehicles 10 years or newer remain eligible for Crony International. We will send more information this summer to anybody with a vehicle older than 7 years old.

Well, Crony International Taxi drivers have already figured out how to get around the vehicle age requirement. You don't have to be a brain surgeon, or a Pakistani medical doctor, to drive a cab.

This is what I would do if I were to sign up as a cab driver with the Crony International Taxi brokerage. I would register my 2010, Crown Victoria. Then I would buy a used taxi from one of the many dying non-Crony International Taxi operators for about $500 and use that car for running my taxi business.

"Niagara police say they also learned that one driver is “currently charged with a criminal offence,” one was not the advertised Uber driver of record, one vehicle did not have provincial registration, and three drivers were from outside Niagara Region and “did not know the area.” -- see "Niagara police charge 20 Uber drivers"


Will my vehicle require another inspection?

All vehicles must undergo an inspection based on criteria to be laid out by the City. We will provide details (potential dates, locations, costs) in coming weeks. We’ll work hard to make this process efficient and affordable!

If the "criteria to be laid out by the City," are anything like the rest of the special rules for Crony International they will probably resemble the following:

  1. Does it have four wheels? Check.
  2. Does it have an accelerator? Check.
  3. Does is have a steering wheel? Check.
  4. Windows and seats? Check.

And if it happens to include more onerous standards, like tire wear, Crony International cab owners will soon figure out ways to get around this, as taxi owners in the past have done.

Step 1: find a willing garage.

Step 2: before the inspection, put the vehicle on the hoist and replace the old tires with a brand new set of borrowed tires.

Step 3: take the vehicle to the designated inspection station and receive a pass.

Step 4: return to the garage and get them to put the old tires back on.

If you don't think Crony International cab owners will resort to this tactic then you probably also believe that Crony International cabbies won't be negotiating off-app trips for cash.

Which finally brings us to,


Will vehicles require cameras?

There will be no requirement for cameras in vehicles.

All of the other taxi brokerages will require the expensive cameras. So much for levelling the playing field by placing expensive burdens upon all but the favoured (crony) brokerage.

One clueless Toronto politician is reported to have opined that Crony International cabs should not require cameras because all of their trips are paid for by credit cards.

Anyone who actually works in the business knows this claim is laughable. Of course, Crony International drivers are accepting cash payments for their services. Why wouldn't they? They save on Crony International's 25% brokerage fee as well as other enticements.


Meet your new taxi broker, same as the old taxi broker.

Meet your new taxi driver, same as the old taxi driver.

I have almost forty years experience in a business that has, at least, a four hundred year history. Human nature, and political/market forces, never change whether they are manifest in a welfare state or an idealized laissez-faire system.

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