A federal appeals court says Uber and taxis are not the same type of service, and, hence, it's OK to regulate them differently. In a blow to taxi drivers, the decision means cities like Chicago can have separate regulations for Uber and taxis—with the more onerous ones targeting cabbies.

The US 7th Circuit Court of Appeals said drivers like Lyft and Uber don't have to have their fares regulated or their drivers licensed. In a federal lawsuit, cabbies said the different treatment is an illegal double standard, discriminatory, anti-competitive, and is forcing them out of business.

"The plaintiffs continue to receive some insulation from competition, because they alone are permitted to operate taxicabs in Chicago. Taxicabs are preferred to Uber and other TNPs (transportation network providers) by many riders, because you don’t have to use an app to summon them—you just wave at one that drives toward you on the street—and also because the fares are fixed by the City," the court ruled.

In dismissing the suit, the court ruled (PDF) the two services cannot be compared. It's like comparing apples and oranges, or, more appropriately, it's comparing dogs to cats—and the cabbies are the dog in this analogy. The outcome upholds a 2014 decision by Chicago city leaders that Uber and Lyft drivers may operate almost freely in the city, without having to pay for taxi medallions or succumb to a host of other regulations heaped onto taxi drivers.

Here’s an analogy: Most cities and towns require dogs but not cats to be licensed. There are differences between the animals. Dogs on average are bigger, stronger, and more aggressive than cats, are feared by more people, can give people serious bites, and make a lot of noise outdoors, barking and howling. Feral cats generally are innocuous, and many pet cats are confined indoors. Dog owners, other than those who own cats as well, would like cats to have to be licensed, but do not argue that the failure of government to require that the "competing" animal be licensed deprives the dog owners of a constitutionally protected property right, or alternatively that it subjects them to unconstitutional discrimination. The plaintiffs in the present case have no stronger argument for requiring that Uber and the other TNPs be subjected to the same licensure scheme as the taxi owners. Just as some people prefer cats to dogs, some people prefer Uber to Yellow Cab, Flash Cab, Checker Cab, et al. They prefer one business model to another.

Writing for the three-judge majority, Judge Richard Posner said that ride-hailing services are part of the disruption culture now.

A license to operate a coffee shop doesn’t authorize the licensee to enjoin a tea shop from opening. When property consists of a license to operate in a market in a particular way, it does not carry with it a right to be free from competition in that market. A patent confers an exclusive right to make and sell the patented product, but no right to prevent a competitor from inventing a noninfringing substitute product that erodes the patentee’s profits. Indeed when new technologies, or new business methods, appear, a common result is the decline or even disappearance of the old. Were the old deemed to have a constitutional right to preclude the entry of the new into the markets of the old, economic progress might grind to a halt. Instead of taxis we might have horse and buggies; instead of the telephone, the telegraph; instead of computers, slide rules. Obsolescence would equal entitlement.

The case was brought by the Illinois Transportation Trade Association, which represents cab drivers. Its attorney, Edward Feldman, said the group was considering an appeal. "We don’t find those analogies persuasive," he told the Chicago Sun-Times.

When the case was argued three weeks ago, the cabbies complained that taxi revenue is down by as much as 50 percent, given that there are some 90,000 drivers working for Lyft and Uber in the Chicago area.

The playing field was changed somewhat in June. Chicago city leaders approved a plan requiring ride-hailing service drivers to take an online course. Cab drivers, however, must be fingerprinted, obtain a chauffeur's license, and take an in-person class that costs $300.

Ride-hailing companies don't have to get medallions, either. The city-issued medallions—the permits that owners of taxis must get to operate legally—peaked in price in 2013, at $357,000. A recent transfer of a medallion between companies cost $60,000, lawyers for the cabbies told the appeals court.