Minneapolis, the City of

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IN THE MATTF:R OF THE CITY OF MINNEAPOLIS ORDER WITHDRAWING COMPLAINT IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9180. Complaint, May 10, 1984-order Withdrawing Complaint, May, 1985 This order withdraws the complaint alleging that the City of Minneapolis had combined, contracted or agreed with taxicab companies to pursue certain anticompetilive policies in violation of Section 5 of the Federal Trade Commission Act. The Commission held that changes now made in the City s municipal Code, which includes raising the number oflaxicab licenses to be made available to operators significantly relieves the injury to competition alleged in the complaint and . . . may eliminate the need for further Commission action, " Thus, continuing the matter would not be in the public interest. In withdrawing its complaint, the Commission expressed no opinion as to whether the "Jiability of the City of Minneapolis could have been established at trial." Appearances For the Commission: Jerry A. Philpott. For the respondent: John French, French, Faegre Benson Minneapolis, Minn. and Robert J Alrton and Scott Reeves, City of Minneapolis, Minneapolis, Minn.

COMPLAINT The Federal Trade Commission, having reason to believe that the City of Minneapolis, a municipal corporation subject to the jurisdiction of the Commission, hereinafter sometimes referred to as Respondent or the City, has violated the provisions ofthe Federal Trade Commission Act, as amended (15 U. C. 45), and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges as follows:

For purposes of this complaint, the following definitions shall apply:

(A) Taxicabmeans any motor vehicle, except a limousine, regularly engaged in the business of carrying passengers for hire, having a seating capacity ofJess than ten (10) persons and not operated on a fixed route or schedule.

(B) License means the annual taxicab vehicle license issued by the :304 Complaint City of Minneapolis that authorizes the holder thereof to operate a taxicab within the City of Minneapolis.

(C) Owner-operator means an individual or company that owns at least one taxicab and taxicab license issued by the City of Minneapolis.

(D) Leasing means the practice by taxicab owner-operators of entering into an agreement with a person who is authorized by the City of Minneapolis to drive a taxicab, wherein for a rental fee paid to the owner operator said driver is entitled to use a taxicab and its corresponding taxicab license for a specified time and retain all fares collected from passengers.

(E) CPCN means the certificate of public convenience and necessity issued by the Minneapolis City Council that is the prerequisite for issuance by the City of Minneapolis of a taxicab license. (F) Taxicab company means any business organization, corporation, partnership, cooperative or person that at present (or sometime in the past) has a trade name and color scheme registered with the City of Minneapolis for the purpose of operating taxicabs or providing services related to the business of owning, operating and/or leasing taxicabs to taxicab owners, operators and/or drivers authorized to do business by the City.

PARAGRAPH 1. Respondent is a municipal corporation organized under the laws of the State of Minnesota and is a person or corporation within the meaning of the Federal Trade Commission Act, as amended (15 U. c. 45). The City has passed and enforces certain ordinances that regulate the taxicab business in Minneapolis. PAR. 2. At all times relevant herein, Respondent' s acts and practices have affected the businesses of taxicab companies and taxicab owners, operators, drivers or lessees that maintain, and have maintained, substantial courses of business, including the acts and practices as hereinafter set forth, which are in or affect commerce, as commerce" is defined in the Federal Trade Commission Act, as amended, and Respondent is subject to the jurisdiction ofthe Federal Trade Commission. The acts and practices alleged herein are in or affect commerce by affecting at least the following activities that are in or affect commerce:

(A) Taxicabs and taxicab companies provide a primary method of transportation for interstate travelers between Minneapolis-St. Paul International Airport and destinations in Minneapolis. (B) Taxicabs and taxicab companies provide transportation for interstate travelers between Minneapolis and nearby cities in Minnesota and Wisconsin.

(C) Taxicabs and taxicab companies provide transportation to inter- Complaint 105 F.T.

state travelers between train stations, bus terminals and other destinations in Minneapolis.

(0) Taxicabs and taxicab companies provide transportation to interstate travelers between hotels, motels, places of business, convention centers, and tourist attractions and other destinations in and around Minneapolis.

(E) Taxicabs are manufactured in other states and are sold for use in and are transported into Minnesota.

(F) Items and services purchased in substantial quantities such as gasoline, tires, taximeters, two-way radios and various replacement parts for taxicabs originate in other states and have been transported into Minneapolis.

(G) Employment opportunities as a Minneapolis taxicab driver have attracted persons from other states.

PAR. 3. For many years and continuing up to and including the date of the issuance of this complaint, the City has combined, contracted or agreed with taxicab companies, to pursue the following policies and do the following acts, among others:

(A) To permit and encourage taxicab companies to combine and to agree upon proposals to increase fares for taxicabs in Minneapolis. (B) To adopt uniform fares applicable to all taxicabs upon request by taxicab companies.

(C) To limit the number of taxicab licenses in Minneapolis and to prohibit by other means, new entry of taxicab drivers, owners and operators into Minneapolis.

(0) To raise unreasonable barriers to entry to new taxicab companies in Minneapolis.

(E) To prohibit competition from vehicles-for-hire licensed outside Minneapolis.

PAR. 4. The acts and practices of Respondent, as alleged in Paragraph Three, have been and are now having the effects, among others of:

(A) eliminating and preventing substantial competition between competitors and potential competitors in the operation oftaxicabs in Minneapolis;

(8) strengthening the market power of currently authorized taxicab companies operating in the Minneapolis taxicab market; (C) raising, fixing, stabilizing, maintaining, or otherwise interfering or tampering with the rates charged for taxicab service in and from Minneapolis; and (0) depriving interstate and intrastate consumers of taxicab services in and from Minneapolis of the benefits of free and open competition in taxicab services.

CITY UF MjNNb;APUL1 ;jut 301 Dissenting Statement PAR. 5. The acts and practices of Respondent, as alleged herein were and are to the prejudice and injury ofthe public and constituted and constitute unfair methods of competition in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act as amended. The acts and practices, as herein alleged, are continuing and wil continue in the absence of the relief herein requested. STATEMENT OF CHAIRMAN JAMES C. MILLER III After extensive consideration of the issue, I have voted today to issue complaints in accordance with my statutory responsibility to act when there is reason to believe that the law has been violated. The action taken by the Commission today is based upon allegations of monopoly power and alleged violations of the U.S. antitrust laws in the taxi markets of Minneapolis and New Orleans (105 F. C. lJ. As a technical matter, the way a case is brought most effectively in such situations is to address regulations enacted by the city governments. I wish to stress that our concern is with allegations of mono poly power in taxi markets, and is not driven by any interest in limiting the lawfully-exercised powers of the cities themselves. I also wish to stress that our concern is solely with restraints on competition; we have no concerns with rules affecting safety, insurance, and other related service standards. The Commission s decision today comes after a la-year staff study of taxi markets, after extensive inquiries and discussions with city offcials and taxi operators, and after thorough briefing of the Commission by the agency s career staff STATEMENT OF COMMISSIONER MICHAEL PERTSCHUK * DISSENTING FROM THE ISSUANCE OF COMPLAINTS AGAINST THE CITIES OF MINNEAPOLIS AND NEW ORLEANS I dissent from the Commission s decision to issue complaints against the cities of Minneapolis and New Orleans (105 F. C. 1) charging each city with an illegal combination or conspiracy in violation of the Sherman and FTC Acts. The complaints allege that each city conspired with taxicab owners and drivers to restrain trade in the provision of taxicab services through the enactment of municipal regulations that establish fixed taxi fares and create barriers to entry into the market.

For the Commission to succeed under the theories alleged in these complaints, it must first prove that the challenged regulations were the result of an ilegal combination or conspiracy rather than lawful . Michael Pp.rtschuk, Commissioner 1977-1984 Order 105 F.

actions taken by the cities in the interest oftheir citizens. I am troubled by the idea that a city s adoption oftaxi regulations after consultation with the industry-when consultation is a necessary element of responsible government-transforms the city s regulations into an illegal conspiracy.

Second, when the federal antitrust laws come in apparent conflict with regulations enacted by a governmental entity such as a municipality, the Commission must be especially confident that federal intervention is warranted. Here it is at the very least unclear whether the economic theory of these complaints fits the facts as we know them. Studies commissioned by the Department of Transportation and others of cities where taxi service was deregulated do not demonstrate that the public benefited. Fares often rose and there is considerable doubt whether service improved. Finally, Congress is currently considering legislation which would exempt most municipal regulations from antitrust scrutiny. I note that the Assistant Attorney General in charge of the Antitrust Division has recently testified in support of that legislation. While the Commission need not consider pending legislation when deciding whether to act, the unpredictable effects of the Commission s action on the taxi market and the legitimate regulatory interests ofthe cities counsel restraint in these cases. ORDER Complaint counsel have moved for withdrawal of the complaint in this matter, on the ground that a new municipal ordinance that the City of Minneapolis recently enacted "significantly relieves the injury to competition alleged in the complaint and. . . may eliminate the need for further Commission action." The Administrative Law Judge has certified that motion to the Commission, with the recommendation that the Commission grant the motion. The complaint alleges that the City of Minneapolis has combined, contracted or agreed with taxicab companies in a number of respects relating to fare increases fare uniformity, limitations on the number of taxicab licenses issued in Minneapolis, barriers to entry, and competition from vehicles-forhire licensed outside Minneapolis, in violation of Section 5 of the Federal Trade Commission Act, 15 U.s.C. 45. In the Notice ofContemplated Relief that accompanied the complaint, the Commission indicated that as part of any relief it might order, it might prohibit enforcement ofthree separate groups of Minneapolis Code provisions: (1) Section 341.710 et seq. (with some exceptions), which generally regulate fares; (2) portions of Section 341.260 and Section 341.280 which established a variety of criteria for determining whether new CITY OF MINNEAPOLIS 309 304 Order 341.310, which established 248 as the maximum number of taxicab licenses (other than 48 "winter licenses ) available to operators in any given year.

The City of Minneapolis has now amended its Code to repeal Section 341.260 and Section 341.280. It has also amended Section 341.300 of the Code to raise the number of taxicab licenses from 248 to 323 by February 1, 1986, and by as many as an additional 25 licenses every year thereafter, beginning on July 1, 1986. These changcs offer the prospect of preventing the anticompetitive conduct alleged in the complaint by strongly facilitating new entry into the Minneapolis taxicab market. The Commission has therefore determined that continuing this matter would not presently serve the public interest, and that the complaint should be withdrawn. In taking this action, we express no opinion as to whether the liability ofthe City ofMinneapolis could have been established at trial.

Accordingly, it is ordered that the complaint issued against the City of Minneapolis in Docket No. 9180 be, and it hereby is, withdrawn.

Commissioner Azcuenaga did not participate. 1 Section 341.290(b) has been amended to require that alllicet1.;c holden must be " a mernbl'T of a company, cooperative. oraRsociation withatleasteighttaxicilbslicensed by Minneapolis; atJeast fifleen Jicensed taxkabs operatp.d under a common color scheme with common radio di patching faciljtie " and a total afat Jea l fifteen uch taxicabs licensed in Mirme"polis within one year of jgSlmnee of the first eight jicenses. Section 341.290(c) exempts taxicahs already holdinglicenf!p.s from this requirement Complaint 105 F.