(Updates with letter from state in seventh paragraph.)
July 10 (Bloomberg) -- Lyft Inc. isn’t authorized to offer ride-sharing in New York, the city’s taxi regulator said, just days before it was due to start service.
The service hasn’t complied with safety requirements and licensing criteria, and the city’s rules and laws will be enforced, the New York City Taxi & Limousine Commission said in an e-mailed statement yesterday. Lyft said it still plans to start operations in the city tomorrow.
Lyft’s debut would offer more competition to Uber Technologies Inc. in the booming market for new ways to move people and cars more efficiently through cities. By disrupting local taxi industries, car-booking and ride-sharing apps have faced lawsuits in the U.S. and demonstrations in cities from London and Madrid to Berlin and Paris.
“Every rider deserves the safety and consumer protections our rules provide,” Meera Joshi, chair of the Taxi & Limousine Commission, said in the statement. “We’re still hopeful that Lyft will accept our offer to help them do the right thing for New York City passengers.”
The commission’s licensing and base station rules don’t apply to Lyft’s ride-sharing model, Erin Simpson, a spokeswoman for San Francisco-based Lyft, said in an e-mailed statement.
“It’s important to clarify that our differences of opinion are not about safety standards, and that’s because we put safety first,” she said. “We will never waver in keeping our drivers and passengers safe.”
Cease and Desist
Adding to Lyft’s challenges, the New York State Department of Financial Services on July 8 issued a cease and desist letter, saying that the company is violating the state’s laws, including selling insurance directly to New York drivers and requiring them to buy from a specific insurer in order to join Lyft’s program. Benjamin Lawsky, the superintendent of the department, said in the letter that DFS is willing to work with Lyft to determine how the company can operate legally in the state.
“Lyft must cease violating New York law by suspending its ongoing operations and postponing any further launches in New York,” Lawsky wrote. “Should Lyft fail to comply with this directive, DFS will take appropriate action to protect New York consumers and the New York private passenger insurance market.”
Simpson, the Lyft spokeswoman, said the company is having productive conversations with the Department of Financial Services, and thinks it can resolve all the issues raised in the letter.
Lyft rival Uber has been operating in New York since 2011, and this week reached an agreement with New York Attorney General Eric Schneiderman to limit its peak-pricing tactics and cap fees during emergencies.
While UberX is a ride-sharing service that competes directly with Lyft in other cities, UberX drivers in New York have official taxi licenses and follow a more conventional commercial model.
“Due to TLC regulations, Uber does not currently have a ride-sharing platform in New York,” Nairi Hourdajian, a spokeswoman for Uber, said in an e-mailed statement. “If regulators embrace ride-sharing with a relaxed approach to licensing and enforcement with other companies, Uber will be excited to launch our ride-sharing platform soon in the state of New York.”
Uber temporarily cut the price of its UberX service by 20 percent in New York this week, striving to become cheaper than taxis as Lyft enters the car-service market.
Lyft planned to begin New York operations with 500 drivers. In April, the startup received $250 million from investors including Alibaba Group Holding Ltd. and has been rolling out its service in new cities.
Uber was valued at $17 billion last month in a new financing round, making it worth more than public companies such as Hertz Global Holdings Inc. and retailer Best Buy Co.
--With assistance from Serena Saitto in New York.