How Uber and Lyft bent the rules and won

The campaign started with a tweet.

On Oct. 1, 2012, Uber used Twitter to announce its arrival in Minneapolis. The news prompted an outpouring of love from residents, many of whom had not even used the upstart ride-sharing service.

"Oh man!" tweeted one fan. "Uber is rolling out in Minneapolis. I will literally never need a car again ever, forever."

There was just one problem: Uber didn't have a permit to operate in the Twin Cities. Neither did its competitor, Lyft, which arrived shortly after Uber.

Minneapolis regulators initially threatened to issue tickets and impound any vehicles caught operating illegally, but Uber and Lyft kept going. By 2014, the companies had persuaded government officials in both Minneapolis and St. Paul to back off and approve the regulations they wanted.

There would be no special permits for drivers, no mandatory training and no screening of drivers beyond what the companies chose to do themselves. In fact, the Twin Cities has the least-restrictive rules of any of the nation's 25 biggest metro areas, a Star Tribune review found.

How did the companies do it? As they have in other places, Uber and Lyft quickly built up a local following by giving away free rides and using an aggressive social media campaign to mobilize supporters, who flooded public hearings and deluged local officials with requests for friendly regulations.

"Their attitude was, 'We're coming whether you like it or not because we think we have the right to,' " said former Minneapolis City Council Member Gary Schiff, who dealt with the companies when they first started operating locally. "They were saying, 'We're here and you can't stop us.' "

It's a playbook that has worked throughout the U.S. for Uber and Lyft, who have threatened to leave any city that passes rules the companies find too onerous. Considering their success, other industries are likely to follow the model, in which companies push into new markets before obtaining the necessary government approvals.

It's an approach that has already worked for a few companies, including electric car maker Tesla and lodging website Airbnb, which have taken on entrenched industries and thrived in what two California researchers call "legal gray areas." At the National League of Cities, officials say the next big challenge for local officials could be airborne drones, which are being tested as a way to deliver goods by Amazon and others.

"With the quickness of technology, companies are trying to bring these things to the market incredibly fast — and they see that asking forgiveness later is a model that has worked for some companies," said Nicole DuPuis, a senior research associate at the league. "We want to make sure cities are welcoming innovation. But laws are put in place for a reason: to protect public safety and promote community values."

Uber and Lyft officials downplay the bruising battles they have waged in some cities. David Plouffe, an Uber board member, told an audience in Chicago last year that the company has learned from those fights, which he said reflected the "old Uber."

"The truth is, we're called a disruptive company — I think it's more accurate to call us an addictive company," Plouffe said at the event. "When the discussion two years ago was really about old taxi regulation [vs.] new technology-based services, there's a collision. Now the debate in the U.S. has evolved."

For Uber, the No. 1 company in the ride-sharing industry, the origins of what the company's CEO calls "principled confrontation" go back to Uber's first launch in its hometown of San Francisco.

In 2010, shortly after Uber began offering rides in the Bay Area, state regulators ordered the company — then known as UberCab — to "cease and desist" as a for-hire passenger carrier because it was operating without a license. Uber changed its name but didn't stop providing the service.

Uber CEO and co-founder Travis Kalanick told the New York Times it was necessary for his upstart company to break a few rules.

"If you put yourself in the position to ask for something that is already legal, you'll find you'll never be able to roll out," Kalanick said in a 2012 interview. "The corruption of the taxi industries will make it so you will never get to market."

Similar scenarios played out in almost every other major city in the U.S. as Uber and Lyft crashed into new markets without licenses, claiming the companies were exempt from taxi regulations because they were technology companies — not transportation companies. Regulators often responded with fines, which the companies offered to cover in order to keep their vehicles on the road. In Pennsylvania alone, Uber racked up $11.4 million in penalties for illegal operations.

Uber and Lyft fought back, often using Twitter to encourage customers to sign petitions and pressure local politicians into treating the companies differently from their taxicab competitors. A typical rallying cry: "We need your help to save Uber in Dallas. #DallasNeedsUber."

A Lyft spokeswoman said the company prefers to "work cooperatively" with local officials but maintained that "new regulations are needed for this new industry."

"We are supportive of common-sense regulations that prioritize public safety and consumer choice, while allowing innovative new industries like ride-sharing to grow and thrive," Lyft spokeswoman Alexandra LaManna said.

In most cities, the biggest fight has been over background checks. Uber and Lyft have vigorously opposed the fingerprinting of drivers.

Fingerprinting is widely considered the gold standard of background checks, since it screens out people who may be using fake identities to hide criminal convictions. But Uber and Lyft maintain their checks are sufficient to screen out problematic drivers.

Public officials in some cities have called for tougher regulations after the companies' drivers were charged with raping or physically attacking passengers. In Boston, for instance, there was a public outcry after three Uber drivers were charged with sexual assault. One of those drivers had been convicted of assaulting a correctional officer, a violent felony that should have disqualified him from carrying passengers. That driver was arrested for allegedly raping a 16-year-old girl.

In the Twin Cities, dozens of Uber and Lyft drivers were convicted of offenses that disqualify them under the companies' rules, including two people with felony convictions, a Star Tribune investigation revealed. Police records show that five of those drivers were later involved in crashes while working for the companies.

"It's important to note that no background check is perfect," said Uber spokeswoman Kayla Whaling, who noted that Massachusetts has made it difficult for private companies to access criminal records when conducting checks.

Uber and Lyft officials declined to say how many of their drivers have been removed after being arrested for violent crimes.

In the Twin Cities, Uber and Lyft initially used Twitter to build a customer base. Both companies were generous, with Uber handing out up to $30 in free rides and Lyft promising two weeks of free trips.

Later, as the companies began dealing with public officials, Uber and Lyft used social media to encourage supporters to attend hearings at which ride-sharing regulations were debated. So many people showed up for the first hearing in Minneapolis that many attendees had to wait outside the chamber.

Council Member Jacob Frey, chief author of the rules governing Uber and Lyft, told audience members it was important to accommodate innovation.

"We could have very well taken the easy way out, and many other cities have taken the easy way out, which is to do nothing," said Frey, who is now running for mayor of Minneapolis. "It is not our job to shy away from controversial issues."

Other council members worried about embracing an industry that persistently flouted local regulations.

"They are rule breakers, and we shouldn't be making special rules for people who come into our market and think they deserve special treatment," Minneapolis City Council Member Blong Yang said in a recent interview. "It should be the other way around."

Today, Uber and Lyft provide more rides in the Twin Cities than do traditional taxicabs. In response to written questions, Mayor Betsy Hodges praised city officials for making Minneapolis a "pioneer" by becoming the sixth jurisdiction in the country to legalize ride-sharing.

"The service has proved to be an incredibly popular and safe transportation option for residents and visitors alike," Hodges said in a written statement. "People asked for these services because they see these new options in other cities. As a result, we have been responsive to what we've heard people want and will continue monitoring these new platforms to address whatever changes may be necessary."

Jeffrey Meitrodt • 612-673-4132