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Ride-Sharing Apps Running Into Legal Roadblocks

By Aditi Mukherji, JD | Last updated on

Ride-sharing apps are Lyfting-off in Silicon Valley funding, reports Time Magazine.

The staggering $60 million Lyft investment shows the ride-sharing market is nowhere near yielding to its legal and regulatory headaches. A cross between Craigslist rideshare and cabs, these ride-sharing services are exploding with popularity because they can often be more affordable and easier to book than traditional taxis.

But before you devise a genius plan for a ride-sharing service like Lyft in your area, make sure you don't steer into a regulatory dead-end.

Lyft is a San Francisco-based mobile-phone application -- available on Apple's iPhone and Google's Android devices -- that allows riders to "order" a driver to their location in minutes, Time reports. Lyft takes a cut of the "fare," which is technically a donation. Lyft's drivers, who don a pink moustache on the car's front bumper, are regular people with cars who want to make a few bucks by giving someone a ride.

Sounds like a solid "peer-to-peer" business model, right? Think again.

Lyft, Uber and SideCar have been hit with cease and desist letters, and were each fined $20,000 last fall by California authorities for basically functioning as taxi services without the proper permit. Uber, which operates in New York, is running into a few roadblocks in Big Apple courts over its plan to extend its smartphone service from black livery cars to yellow taxicabs, Time reports.

When you steer into longstanding commercial industries like transportation and aim to disrupt them, you can expect a bumpy legal ride. Among the many legal issues to sort out are: permit fees, wage and hour requirements, data privacy, and accident liability.

You will also want to screen your drivers carefully, because they could be a huge liability.

Lyft was able to get a suspension by the Public Utilities Commission lifted because they had data on why they're safer than traditional taxis or towncars and how they've done a better job screening and training their drivers. All Lyft drivers have to pass DMV and criminal-background checks and are required to undergo in-person interviews, vehicle inspections and a two-hour training session.

In step with HOV lanes, these services might be the regulatory wave of the future. Still, if you have a technology company that makes inroads into highly regulated traditional businesses, you will need the assistance of someone who has a strong understanding of how your local state and municipal government operates.

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