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Opposition to deregulation

Opponents of taxi deregulation argue that deregulation will result in high taxi driver turnover rates which may cause the number of less-qualified taxi drivers to increase, dishonest business practices such as price gouging (especially on airport routes) and circuitous routing, and poor customer service.

A Connecticut General Assembly report argues that deregulation fails to cause price decreases because taxi passengers typically do not price comparison shop when searching for taxicabs, and that fares usually increased with deregulation because the higher supply of taxis caused drivers' earning potential to decrease. This report claims that deregulation resulted in dramatically increased taxi supply, especially at already overserved airport locations, fare increases in every city, and an increase in short-trip refusals by taxicab drivers.

This report argues that deregulation has led to undesirable results in several American cities. Seattle deregulated taxis in 1980, resulting in a high supply of taxicabs, variable rates, price gouging, short-haul refusals, poor treatment of passengers. As a result, Seattle re-regulated in 1984, reinstating a restriction on taxicab licenses and fare controls. In St. Louis, deregulation produced a 35% rise in taxi fares, and taxicab drivers complained of waiting hours at airports for customers at taxicab stands. Taxicab companies claimed they increased fares in order to make up for lost competition resulting from the increased supply of taxis. As a result, the St. Louis City Council froze new taxicab licenses in 2002.

A study of the deregulation of taxis in Sweden in 1991 showed that the taxicab supply increased, but average fares also increased in almost all cases. Specifically, average fares per hour increased for all trips. Average fares also increased for fares calculated by distance (per kilometer) in almost every category studied – for all customer-paid trips in municipalities of all 3 sizes (small, medium, and large) and increased for municipality-paid trips in small and large municipalities; fares only decreased for municipality-paid trips in medium-sized municipalities that were calculated per kilometer. Deregulation also resulted in decreased taxicab productivity and decreased taxi-company revenues. This study concluded that deregulation resulted in increased fares especially in rural areas and the authors argued that the increased fares were due to low taxi company revenues after deregulation.

Taxi companies claim that deregulation would cause problems, raise prices and lower service level on certain hours or in certain places.

The medallion system has been defended by some experts. They argue that the medallion system is similar to a brand-name capital asset and enforces quality of service because quality service results in higher ridership, thus increasing the value of owning the medallion. They argue that issuing new medallions would decrease the medallion value and thus the incentive for the medallion owner to provide quality service or comply with city regulations. They also argue that the medallion may be preferable to alternate systems of regulation (such as fines, required bonds with seizures of interest payments on those bonds for violations, or licensing of all would-be taxis with revocation of that license for violations) because fines are difficult to collect, license revocation may not be a sufficient deterrent for profitable violations such as price cheating, and because using penalties on bond interest payments give regulators an incentive to impose penalties to collect revenue (rather than for legitimate violations). Medallions do not earn interest and thus inappropriate seizures of interest by regulators is not possible.