Reuters reported on a “car-sharing” practice that is “maybe, almost certainly” illegal.  Two companies in San Francisco have started car-sharing applications which offer consumers rides by car owners who essentially use their free time taxiing people.

The state of California has issued a cease and desist letter, but to no avail.  So far the state has taken no further action.  As part of the taxicab licensing process, individuals and companies must provide driver backgrounds and proof of insurance.

The un-licensed companies (SideCar and Lyft)are under no such obligation.

In 2010, the upstart limousine company, Uber, began and was issued a similar cease and desist, but has not.  In fact, the company has now expanded to a dozen other cities, and the state has not pursued the case.

This presents an interesting conundrum.  On the one hand, it’s unfair competition for current limousine and cab companies and on the other it clearly a service that people are willing to pay for.  The question remains, are the background and insurance requirements of the driver and company necessary, and if so, can they be handled in a manner that is less burdensome on business?

In an update to this story, Uber has confirmed that they are closing their New York city operation after one month.  The city’s Taxi and Limousine Commission sent them a letter that it had issued no authorization to Uber to operate in the city.