No Lyft Off: Ride-Share Service's NYC Launch Delayed

NEW YORK (CBSNewYork/AP) -- A ride-share service has hit a bump in the road as it tries to launch in New York City.

Lyft Inc. said it was planning to start its ride-sharing service in Brooklyn and Queens on Friday evening after signing up 500 people willing to use their own vehicles to carry passengers.

But New York State Attorney General Eric Schneiderman said the court granted the state an injunction preventing Lyft from launching.

"We pursued this action only after repeatedly offering to work with Lyft in order to ensure that its business practices complied with the law," Schneiderman said. "Instead of collaborating with the state to help square innovation with statute and protect the public, as other technology companies have done as recently as this week, Lyft decided to move ahead and simply ignore state and local laws. Lyft's arguments are a disingenuous attempt to disguise old-fashioned law-breaking that jeopardizes public safety."

Schneiderman had filed a lawsuit earlier Friday, saying the company operates "in open defiance'' of state and local licensing and insurance laws. The suit said the company actually operates as a traditional for-hire livery service using mobile technology, not a peer-to-peer transportation platform as claimed, and that it began operating in Buffalo and Rochester without authorizations in April and currently violates various laws.

"We are pro-innovation and pro-competition, but allowing Lyft to flout dozens of different laws would, in addition to putting the safety of New Yorkers at risk, put law-abiding competitors at a substantial disadvantage," Schneiderman said. "We are hopeful that Lyft will now recognize that it has to play by the same set of rules as everyone else."

The company released a statement earlier Friday, saying it is in a legal process with local regulators and will proceed accordingly.

"We always seek to work collaboratively with leaders in the interests of public safety and the community, as we've done successfully in cities and states across the country, and hope to find a path forward for ride-sharing in New York," the statement read.

The launch was delayed at least until Monday, when Lyft is expected to return to court.

Lyft's vehicles are easy to identify because they are adorned with fuzzy pink mustaches.

"It's surprising, it's shocking, it gets people to talk about it and it kicks things off on a fun note," company co-founder John Zimmer told "CBS This Morning."

Zimmer said the accessory reflects the company's culture.

"Lyft is about getting there affordably, but also having a good time," he said.

Drivers, however, are not required to attach the mustaches to their vehicles. It is only a suggestion.

Zimmer believes the service could transform urban transportation.

"Now it's an extreme burden to own a car and to operate a car and that comes in the form of parking; that comes in the form of traffic; that comes in the form of expenses and maintenance and insurance," Zimmer said. "So when you can provide a service that eliminates all those things, it's a very exciting proposition."

The San Francisco-based start-up already offers its app-based service in 60 cities, but the Taxi and Limousine Commission said Lyft is unauthorized to operate in New York City, CBS 2 reported.

"Lyft has not complied with TLC's safety requirements and other licensing criteria to verify the integrity and qualifications of the drivers or vehicles used in their service, and Lyft does not hold a license to dispatch cars to pick up passengers," the TLC said in a statement. "In keeping with the TLC's priority of protecting public safety and consumer rights, the agency will be conducting enforcement operations to ensure compliance with the city's rules and laws."

The agency is warning drivers they could face steep fines or their cars may be confiscated if they pick up riders. Zimmer said the company will compensate drivers who are fined or have their cars seized, 1010 WINS reported.

"We don't want to put passengers in New York City at jeopardy into getting into untested cars with untested drivers," TLC Commissioner Meera Joshi said.

New York's Department of Financial Services also sent a cease and desist letter to the company accusing it of acting in "bad faith" and warning "Lyft's activities in New York violate a host of laws," CBS 2's Tony Aiello reported.

Lyft's founders argued in court that all of its drivers go through extensive criminal background checks and the company accepts only 4 percent of applicants, WCBS 880's Marla Diamond reported. Lyft said cars are also insured.

Company spokeswoman Katie Kincaid said the service is safer than street hails.

"Everything is done through the application, there is never any cash exchanged," she said.

Lyft insists it shouldn't be regulated like a traditional metered taxi company, claiming it's a ride-share service that lets you summon a car with a smartphone app and then make a donation to the driver.

"What we're building is an entirely different experience," Zimmer said.

The TLC said services including Uber, Hailo and Taxi Magic have conformed to city rules, but Lyft has not. Existing competitor Uber has said if the city doesn't crack down on Lyft, it will buck city rules and launch its own fleet of unlicensed cars.

"We've worked successfully with those other folks.  They've come to us with their ideas. We've figured out how they can work within our regulatory structure and we've made tweaks where necessary to make sure their advantages can be at the disposal of the passengers. Lyft has not worked within our regulatory system," Joshi said.

Late Friday afternoon Lyft promised to do just that, vowing to rework its ride-share model to the TLC's satisfaction, Aiello reported.

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