DC’s dockless scooter decision is bad for consumers but great for Jump and Lyft

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You don’t need a Ph.D. in economics to understand that limits on competition are usually a bad idea. Innovation and entrepreneurship bring fresh ideas, improvements in quality, more options, and lower prices. When governments limit rivalry through regulation, consumers lose these benefits. Unfortunately, the District of Columbia is making this exact mistake by limiting competition among dockless scooter companies.

This month, the District Department of Transportation announced its 2020 Dockless Vehicle Sharing Program, drastically reducing the number of scooter companies allowed to operate within its jurisdiction. Eight companies participated in the 2019 program, but out of the 19 companies that applied for 2020, only four were approved.

Although DDOT partially explained how it evaluated applications, it gave no justification for halving the number of admitted firms. Limiting the number of participants will likely harm consumers and definitely harms potential competitors who may no longer deploy their scooters in D.C. But this is great news for the companies that won the exclusive right to operate — Jump, Lyft, Skip, and Spin.

Artificial constraints on competition almost always harm consumers. Limiting entry and innovation usually results in higher prices, less access to products, and lower quality service. When the government gives companies the chance to charge more or offer lower-quality service by cutting corners, they usually do so. Competition typically prevents this from occurring. If people don’t like Bird’s prices or customer service, they can always ride a Lime. Then, if Bird doesn’t step up its game, it risks losing customers and profit.

However, this only works if there’s a Lime to switch to in the first place. Sadly, under DDOT’s new plan, consumers won’t get to choose either Bird or Lime, because neither of them made the District’s final cut.

The Washington Post explains the logic behind this competition-limiting plan as follows: “By keeping the number of operators to four, officials say the city will be able to provide better oversight and respond more expeditiously to public complaints about issues such as badly parked scooters.”

But imagine if the city government-regulated restaurants according to this logic and hypothetically argued that by keeping the number of burger joints to just four providers, it would be able to provide better oversight and respond more expeditiously to public complaints about food quality. Consumers would be rightly outraged because they understand that limiting competition shrinks not only their range of options but also the overall quality of choices (and prices) for burgers. The same is true for scooters.

Maybe the number of scooters deployed was too unruly, and the District thought it could clear up its sidewalks by limiting the number of scooter firms operating. But this justification doesn’t hold up. For at the same time it announced the four admitted firms, DDOT also announced it was expanding the total number of deployable scooters within the District to 10,000, a 60% increase over the current total. Clearly, the city isn’t worried about too many scooters cluttering things up.

Even if it were, there were less restrictive alternatives, such as designating parking or issuing tickets. These would more directly address the problem while still allowing competition and innovation. The city can still enact rules governing where scooters can be operated and parked, for example. Instead, DDOT chose to take a much more radical approach by restricting competitors. This sends a negative message to future innovators and entrepreneurs regarding its openness to new ideas and competition.

Regardless of the District’s justifications, limiting competition is the wrong way to go. Standing in the way of an active and competitive market harms entrepreneurs and consumers. It seems like the only people not harmed by this new scooter decision are those few companies lucky enough to have the District’s regulatory blessing.

Adam Thierer is a senior research fellow at the Mercatus Center at George Mason University and author of Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom. Trace Mitchell is a research associate with the Mercatus Center’s Project on Innovation and Governance.

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