In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 16‐2009, ‐2077, & ‐2980
ILLINOIS TRANSPORTATION TRADE ASSOCIATION, et al.,
Plaintiffs‐Appellants,
v.
CITY OF CHICAGO,
Defendant‐Appellee,
and
DAN BURGESS, et al.,
Intervening Defendants‐Appellees.
____________________
Appeals from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 1:14‐cv‐00827 — Sharon Johnson Coleman, Judge.
____________________
ARGUED SEPTEMBER 19, 2016 — DECIDED OCTOBER 7, 2016
____________________
Before POSNER, WILLIAMS, and SYKES, Circuit Judges.
POSNER, Circuit Judge. This case, closely parallel to Joe
Sanfelippo Cabs, Inc. v. City of Milwaukee, No. 16‐1008, also de‐
cided today, involves constitutional challenges to the en‐
2 Nos. 16‐2009, ‐2077, ‐2980
deavor of a city (Chicago in this case, Milwaukee in the oth‐
er) to stimulate greater competition in the “for‐hire auto
transportation market.” That is the market composed of
owners of taxicabs that one hails on the street, of livery ser‐
vices, which are usually summoned by phone (as for that
matter taxis sometimes are), and of the newer auto‐transport
services for hire, of which the best known is Uber (the sec‐
ond best known is Lyft); generically these services are
known either as Transportation Network Providers (TNPs)
or as ridesharing services.
Because the acronym TNPs is not well known, nor the
term ridesharing services, but Uber is very well known,
we’ll focus on Uber, which “at its core … is just an app that
you download to your smartphone and use to get a nearby
Uber driver to come pick you up. While some taxi services
are getting on board with these newfangled apps most for‐
rent cars still wait at the taxi stand or require you to give the
service dispatch center a call in advance. Uber doesn’t do
that. … You can only hitch an Uber ride via the service’s
app.” Kristen Hall‐Geisler, “5 Ways Uber Is Really Different
from a Regular Taxi,” http://auto.howstuffworks.com/tech‐
transport/5‐ways‐uber‐really‐different‐from‐regular‐taxi1.ht
m (visited Oct. 6, 2016, as was the other website in this opin‐
ion). (However, Uber has now added a feature that allows
customers to schedule an Uber pickup in advance. See Ub‐
er.com, “Scheduled Ride for Extra Peace of Mind,”
www.uber.com/info/scheduled‐rides/.) There are other dif‐
ferences, which many consumers consider advantages of
Uber over taxis: the storage of payment information, so that
one does not need to be carrying cash or a credit card; the
ability to see a time estimate of how long a pickup will take
and also a driver’s rating by past users; and the ability to re‐
Nos. 16‐2009, ‐2077, ‐2980 3
quest a ride from wherever one is (e.g., from the comfort of
home, inside during the rain) rather than by hailing on a
street).
The plaintiffs are companies that own and operate either
taxicabs or livery vehicles in Chicago or that provide ser‐
vices to such companies, such as loans and insurance. Taxi
companies are tightly regulated by the City regarding driver
and vehicle qualifications, licensing, fares, and insurance;
livery companies are also tightly regulated, but we won’t
need to discuss them separately. Uber (which remember
we’re treating as representative of the TNPs) is less heavily
regulated than the taxi and livery companies (until 2014 it
wasn’t regulated at all) and has a different business model.
For example, you can’t hail an Uber vehicle on the street;
you must use a smartphone app to summon an Uber car.
Since 2014 Uber and the other TNPs have been governed by
an ordinance, but it is different from the ordinances govern‐
ing taxi and livery services and more permissive; for exam‐
ple, it allows the companies to set their own fares, and in this
and other ways allows them to do by contract some of the
things that Chicago ordinances require taxi and livery com‐
panies to do.
The plaintiffs challenge the ordinance on seven grounds,
of which four are based on the U.S. Constitution and the
other three on Illinois law. The district judge dismissed all
but the two claims that accuse the City of denying the equal
protection of the laws by allowing the TNPs to compete with
taxi and livery services without being subject to all the regu‐
lations governing those services. The plaintiffs appeal the
district judge’s dismissal of five of their claims and the City
appeals the judge’s refusal to dismiss the other two as well.
4 Nos. 16‐2009, ‐2077, ‐2980
All seven of the plaintiffs’ claims are weak. The first is
that allowing the TNPs into the taxi and livery markets has
taken away the plaintiffs’ property for a public use without
compensating them. A variant of such a claim would have
merit had the City confiscated taxi medallions, which are the
licenses that authorize the use of an automobile as a taxi.
Confiscation of the medallions would amount to confiscation
of the taxis: no medallion, no right to own a taxi, Boonstra v.
City of Chicago, 574 N.E.2d 689, 694–95 (Ill. App. 1991),
though the company might be able to convert the vehicle to
another use. Anyway the City is not confiscating any taxi
medallions; it is merely exposing the taxicab companies to
new competition—competition from Uber and the other
TNPs.
“Property” does not include a right to be free from com‐
petition. A license to operate a coffee shop doesn’t authorize
the licensee to enjoin a tea shop from opening. When proper‐
ty consists of a license to operate in a market in a particular
way, it does not carry with it a right to be free from competi‐
tion in that market. A patent confers an exclusive right to
make and sell the patented product, but no right to prevent a
competitor from inventing a noninfringing substitute prod‐
uct that erodes the patentee’s profits. Indeed when new
technologies, or new business methods, appear, a common
result is the decline or even disappearance of the old. Were
the old deemed to have a constitutional right to preclude the
entry of the new into the markets of the old, economic pro‐
gress might grind to a halt. Instead of taxis we might have
horse and buggies; instead of the telephone, the telegraph;
instead of computers, slide rules. Obsolescence would equal
entitlement.
Nos. 16‐2009, ‐2077, ‐2980 5
Taxi medallions authorize the owners to own and oper‐
ate taxis, not to exclude competing transportation services.
The plaintiffs in this case cannot exclude competition from
buses or trains or bicycles or liveries or chartered sight‐
seeing vehicles or jitney buses or walking; indeed they can‐
not exclude competition from taxicab newcomers, for the
City has reserved the right (which the plaintiffs don’t chal‐
lenge) to issue additional tax medallions. Why then should
the plaintiffs be allowed to exclude competition from Uber?
To this question they offer no answer.
All that the City gives taxi‐medallion owners is the right
to operate taxicabs in Chicago, see Municipal Code of Chica‐
go § 9‐112‐020(b) (a parallel provision, § 9‐114‐020(b), gov‐
erns liveries). That isn’t a right to exclude competitive pro‐
viders of transportation. As pointed out in Boston Taxi Own‐
ers Ass’n, Inc. v. City of Boston, 2016 WL 1274531, at *5 (D.
Mass. March 31, 2016), “if a person who wishes to operate a
taxicab without a medallion is prevented from doing so, it is
because he or she would violate municipal regulations, not
because he or she would violate medallion owners’ property
rights.” Section 9‐112‐020(b) of the Municipal Code, cited
above, which has been on the books since 1963, entitles the
medallion owners to be the exclusive providers of taxi ser‐
vice, but not to exclude alternatives to the service they offer.
The City has created a property right in taxi medallions; it
has not created a property right in all commercial transpor‐
tation of persons by automobile in Chicago.
The plaintiffs continue to receive some insulation from
competition, because they alone are permitted to operate
taxicabs in Chicago. Taxicabs are preferred to Uber and oth‐
er TNPs by many riders, because you don’t have to use an
6 Nos. 16‐2009, ‐2077, ‐2980
app to summon them—you just wave at one that drives to‐
ward you on the street—and also because the fares are fixed
by the City.
The plaintiffs argue that the City has discriminated
against them by failing to subject Uber and the other TNPs
to the same rules about licensing and fares (remember that
taxi fares are set by the City) that the taxi ordinance subjects
the plaintiffs to. That is an anticompetitive argument. Its
premise is that every new entrant into a market should be
forced to comply with every regulation applicable to incum‐
bents in the market with whom the new entrant will be
competing.
Here’s an analogy: Most cities and towns require dogs
but not cats to be licensed. There are differences between the
animals. Dogs on average are bigger, stronger, and more ag‐
gressive than cats, are feared by more people, can give peo‐
ple serious bites, and make a lot of noise outdoors, barking
and howling. Feral cats generally are innocuous, and many
pet cats are confined indoors. Dog owners, other than those
who own cats as well, would like cats to have to be licensed,
but do not argue that the failure of government to require
that the “competing” animal be licensed deprives the dog
owners of a constitutionally protected property right, or al‐
ternatively that it subjects them to unconstitutional discrimi‐
nation. The plaintiffs in the present case have no stronger
argument for requiring that Uber and the other TNPs be
subjected to the same licensure scheme as the taxi owners.
Just as some people prefer cats to dogs, some people prefer
Uber to Yellow Cab, Flash Cab, Checker Cab, et al. They pre‐
fer one business model to another. The City wants to en‐
Nos. 16‐2009, ‐2077, ‐2980 7
courage this competition, rather than stifle it as urged by the
plaintiffs, who are taxi owners.
So there is no merit to the plaintiffs’ claim that the City
has taken property from them without compensation, and
there is also no need to discuss four of their six other claims,
which whether based on the Constitution or on Illinois
common law add nothing to the takings claim. The two ad‐
ditional claims we do need to discuss are the equal protec‐
tion claims, because those are the claims that the district
judge thought had sufficient potential merit to survive a mo‐
tion to dismiss. She ruled that the City, by failing to place as
many regulatory burdens on the TNPs as on the taxicab
companies, might have denied the latter the equal protection
of the law. But this was taking equal protection literally, and
it should not be taken so. Otherwise prospective entrants to
a market who had lower costs than incumbent firms would
not be allowed to enter the market unless some regulatory
entity burdened the new entrants with regulations, whether
or not necessary or even appropriate, that eliminated any
cost advantage the new entrants would otherwise have in
competing with the incumbent firms. The imposition of such
an impediment to competition and disservice to consumers
would be absurd.
The proper question to ask regarding equal protection is
whether the regulatory differences between Chicago taxicabs
and Chicago TNPs are arbitrary or defensible, and the City
makes a compelling case that they’re the latter. Taxis but not
TNPs are permitted to take on as passengers persons who
hail them on the street. Rarely will the passenger have a pri‐
or relationship with the driver, and often not with the taxi‐
cab company either; and it makes sense therefore for the
8 Nos. 16‐2009, ‐2077, ‐2980
City to try to protect passengers by screening the taxi drivers
to assure that they’re competent and by imposing a uniform
system of rates based on time or distance or both. So taxi
service is regulated by the City of Chicago, but so is TNP
service, though differently because the service is different
from taxi service. A major difference is that customers, ra‐
ther than being able to hail an Uber car, must sign up with
Uber before being able to summon it, and the sign up creates
a contractual relationship specifying such terms as fares,
driver qualifications, insurance, and any special need of the
potential customer owing to his or her having a disability.
Unlike taxicab service Uber assumes primary responsibility
for screening potential drivers and hiring only those found
to be qualified, and the passengers receive more information
in advance about their prospective rides—information that
includes not only the driver’s name but also pictures of him
(or her) and of the car. Furthermore, the TNPs use part‐time
drivers extensively, and it is believed that these part‐timers
drive their cars fewer miles on average than taxicab drivers,
who are constantly patrolling the streets in hope of being
hailed; and the fewer miles driven the less likely a vehicle is
to experience wear and tear that may impair the comfort of a
ride in it and even increase the risk of an accident or a
breakdown.
There are enough differences between taxi service and
TNP service to justify different regulatory schemes, and the
existence of such justification dissolves the plaintiffs’ equal
protection claim. Different products or services do not as a
matter of constitutional law, and indeed of common sense,
always require identical regulatory rules. The fallacy in the
district judge’s equal protection analysis is her equating her
personal belief that there are no significant differences be‐
Nos. 16‐2009, ‐2077, ‐2980 9
tween taxi and TNP service with the perception of many
consumers that there are such differences—a perception
based on commonplace concerns with convenience, rather
than on discriminatory or otherwise invidious hostility to
taxicabs or their drivers. If all consumers thought the ser‐
vices were identical and that there was therefore no ad‐
vantage to having a choice between them, TNPs could never
have gotten established in Chicago.
Suppose the district judge happened to think dogs and
cats interchangeable, and on that ground ruled that requir‐
ing dogs but not cats to be licensed (the law in Chicago) was
a violation of equal protection. The proper response would
be that she is entitled to her opinion but not entitled to im‐
pose it when the market perceives, and as we noted earlier
has reasonable and nondiscriminatory grounds for perceiv‐
ing, a rational difference between the competing animals
that she does not perceive. Her belief that taxis and TNPs are
interchangeable is similarly not shared by the entire relevant
consumer market.
A “legislature, having created a statutory entitlement, is
not precluded from altering or even eliminating the entitle‐
ment by later legislation. Were the rule otherwise, ‘statutes
would be ratchets, creating rights that could never be re‐
tracted or even modified without buying off the groups up‐
on which the rights had been conferred.’” Dibble v. Quinn,
793 F.3d 803, 809 (7th Cir. 2015), quoting Pittman v. Chicago
Board of Education, 64 F.3d 1098, 1104 (7th Cir. 1995); see also
Wisconsin & Michigan Ry. Co. v. Powers, 191 U.S. 379, 387
(1903) (“the legislature is not making promises, but framing
a scheme of public revenue and public improvement”).
10 Nos. 16‐2009, ‐2077, ‐2980
Beginning in the 1970s a deregulation movement swept
the country, powered by the belief that competition is often a
superior alternative to regulation. Entire agencies vanished,
such as the Civil Aeronautics Board, which had greatly lim‐
ited competition in the airline industry. Many cities loosened
the regulatory limitations on taxi services—and this well be‐
fore there were any TNPs. See Adrian T. Moore & Ted Ba‐
laker, “Do Economists Reach a Conclusion on Taxi Deregu‐
lation?” 3 Econ Journal Watch 109, 111 (2006). The deregula‐
tion movement has surged with the advent of the TNPs.
Chicago, like Milwaukee in our companion Sanfelippo case,
has chosen the side of deregulation, and thus of competition,
over preserving the traditional taxicab monopolies. That is a
legally permissible choice.
The judgment of the district court is affirmed in all but
that court’s ruling on the plaintiffs’ equal protection claims;
that ruling is reversed with instructions to dismiss those
claims with prejudice.