In the Summer 2013 issue, I discussed regulations that had been imposed on “black car” livery services by the municipal government of Nashville, Tenn. (“Nashville’s Anticompetitive ‘Black-Car’ Regulations”). Black car companies use high-quality sedans to provide rides to passengers who arrange for service by phone or online. Nashville’s black car regulations harmed residents and tourists in order to increase the profits of taxi and limousine company owners. The worst of the regulations was a $45 minimum fare requirement for black cars. A suit brought by the Institute for Justice that asked a federal court to strike down the regulations on constitutional grounds, as unjustified restrictions on economic liberty, went to trial in January 2013 but was unsuccessful.

Fortunately for people wanting to use black car service in Nashville, last January, with 29 of its 40 members voting in favor, the Nashville Metropolitan Council reversed itself. It effectively eliminated the required minimum fare for black cars by reducing it to $9—slightly below the $10 to $13 minimum fares that black car companies decided to charge. In a conversation with a manager of a black car company, two Metro Council members attributed the reversal “in part” to my Regulation article.

Ali Bokhari, who owns Metro Livery, Nashville’s largest black car company, immediately expanded his fleet by four cars, and within a week was providing twice as many rides. His company is now providing rides between the downtown and the airport in luxury sedans for $22, below the $25 taxi fare.

Another development in Nashville played a role in bringing Metro Council to its senses. In December 2013, Uber and Lyft, two companies that provide ride-share services in numerous U.S. cities, began offering those services in Nashville. Drivers are vetted, do not have taxi permits, use their own cars, and receive 80 percent of fare revenue. Riders use smartphones to summon the cars and pay for rides.

The two companies have used promotional pricing to attract customers. Last December the services were essentially free, and on January 31, Uber announced that for the following two weeks new riders would get 100 free rides. Aside from its promotional prices, UberX, as the Uber ride-share service is called, charges a $2.19 base fare plus 20¢ per minute while the car is traveling slowly and $1.22 per mile while the car is traveling fast, with a $4.80 minimum total fare. UberX may charge higher fares to maintain reasonable wait times when demand is very high, a practice that is efficient in allocating existing cars and in providing an incentive for additional drivers and vehicles to supply UberX services for which riders are willing to pay. Lyft uses a similar structure for its “suggested” prices. Those ride-share services offer substantial competition to taxis.

In December, Uber, which also supplies black car services in numerous cities, pushed for relaxation of Nashville’s black car restrictions. Uber posted online a petition addressed to the mayor and Metro Council and obtained 2,519 signatures in favor of relaxation. Two days after the Metro Council relaxed the restrictions, Uber introduced its own black car service with professional drivers and luxury cars that are called with smartphones. UberBlack, as this service is called, charges a $5.95 base fare plus 30¢ per minute while the vehicle is traveling slowly and $2.60 per mile while it is traveling fast, with a $13 minimum total fare. A large majority of UberBlack rides are in fact provided by Metro Livery. As a result, by the end of January Metro Livery was supplying three times as many luxury sedan rides as before the reduction in the required minimum fare. There is now a shortage of luxury sedans and drivers providing black car services in Nashville, and Bokhari plans to purchase additional sedans and hire additional drivers as quickly as he can obtain capital.

On January 23rd, Nashville’s Transportation Licensing Commission further relaxed regulation of transportation services by approving 370 new taxi permits for the eight incumbent cab companies and three new ones: Magic, Pink, and Nash Vegas. However, the government still limits the number of taxicabs.

There has been incredible change for the better in Nashville’s vehicle-for-hire marketplace. The recent reduction in the minimum fare for black cars, expansion of black car service, increase in the number of taxi permits and companies, and introduction of two ride-share services, together with the use of smartphones to obtain quick service and pay for rides, are making Nashville residents and visitors substantially better off, and are making the city a more attractive destination.