A Groupon deal almost forced a couple of Portland, Ore., limousine companies to drive right out of business.
Officials of the Pacific Northwest city, which prides itself on being progressive, balked when the daily discounter hashed out a deal with Towncar.com and Fiesta Limousine to give customers a bargain ride to Portland International Airport.
The two companies had to give refunds to hundreds of customers, or face fines they say would have bankrupted them. Now they're fighting back in federal court.
“It seems inappropriate that the city tells me that I have to charge you more," Mike Porter, owner of TownCar.com, told FoxNews.com. "We are fighting against the city telling us what we should charge the consumer."
In Portland, it is illegal for limo drivers to charge LESS than $50 for rides from downtown to the airport, a 30-mile trip. The idea is to keep regular taxis profitable by not letting anyone undercut them. The Groupon deal provided a discount of $32 for livery service from downtown.
"This is not at all anti-consumer, but rather protects the thousands of riders who use taxicabs every month to get to the grocery store, doctor appointments and other low profit-margin trips, said Frank Dufry, administrator for the Private for Hire Transportation Program at Portland’s Revenue Bureau.
The refunds were voluntarily issued so the companies could avoid a harsher penalty of nearly $900,000 in fines and suspension of their permits for violating a pair of laws enacted by the city back in 2009.
In addition to the $50 rule for airport rides, livery and limousine companies must charge a least 35 percent more than regular taxi cabs for other destinations in the city.
“[A penalty of] $600,000 would have easily put us under. And then some,” said Porter.
A spokesperson for Groupon did not immediately return a request for comment.
Porter’s TownCar.com, along with Fiesta and aided by Virginia-based Institute for Justice, claims that the city of Portland is unconstitutionally enacting laws that drive up the cost of transportation for the consumer in the sake of helping taxicab companies hit higher profits.
“The laws have nothing to do with public safety. It’s economical protectionism,” said Wesley Hottot, lead attorney for the livery companies. “It’s been ruled at the federal level that it is unconstitutional to have this as the only reason to enforce minimum rates.”
"It seems inappropriate that the city tells me that I have to charge you more."
Dufry said letting limo companies undercut cabs would wind up hurting everyone.
“Limousine and Executive Sedan companies have no such requirements, and, as premium services, it is reasonable to expect that they charge a premium price and not just siphon off the high profit-margin trips, such as from downtown hotels to the airport," he said. "You will find the majority of limousine and executive sedan companies having no issue with this,” he said.
Hottot doesn't buy it.
“If Portland’s goal is to help Taxi Drivers it’s not helping at all. Raising the costs will likely have consumers using public transportation less, if at all,” Hottot said.
Nine other cities across the county have enacted similar laws that impose minimum fares for limo and sedan services.
The Institute for Justice is also currently suing the city of Nashville in federal court for a requirement that they charge a minimum fee of $45.