Three San Francisco ridesharing startups have been hit with a cease-and-desist letter by the California Public Utilities Commission, the state regulator that deals with public transportation-related issues.

Lyft, Sidecar (which Ars profiled earlier this year), and a third similar company, Tickengo, received the letters on August 15, 2012—however, the companies did not announce their public response until today. The announcements on their blogs came as the result of a story published late Sunday by the San Francisco Chronicle.

These firms had previously argued that because they merely are a ridesharing website that takes “donations” rather than “fares,” they are not taxi companies. As such, according to the companies, they should not be subject to traditional taxi regulation. State regulators clearly disagree.

“Public Utilities Code section 3571 states that no charter-party carrier of passengers excepting transit districts, transit authorities, or cities owning and operating local transit systems themselves or through wholly owned nonprofit corporations shall engage in transportation services,” the letter states.

Companies maintain they're within the law

In a corporate blog post, SideCar rejected the CPUC’s argument, denying that it is a “charter-party carrier.”

"We don't do that—we don't operate a charter-party carrier," Sunil Paul, the company's CEO, told Ars. "It's not a transportation company, it's a communications platform."

Paul dismissed the letter, saying that the company is still in "conversation" with the CPUC.

"The steps that it takes to do something, to take an enforcement action, require a lot more from the PUC," he added. "This letter is the letter that they usually send to those limo guys that hang out at the airport. This is the kind of letter that they might send to someone like that, because they're operating a limo company without a license. You're talking about a bureaucracy that knows how to do one thing, which is regulate."

Paul characterized his own company as being in line with other Bay Area startups, including Airbnb or Taskrabbit.

"At some level this is regulatory conversation. This is a conversation about public policy and how do we want to organize our cities and how to organize our information technology," he said. "This is a conversation about the role of peer-to-peer and the sharing economy and what the appropriate rules are when we have services like Airbnb and Taskrabbit and others that are enabling individuals to do things that they could never do before. We built this system to be 100 percent legal and we're confident that once regulators and politicians understand what we're doing that they'll agree."

No legal response for now

In a similar blog post also on Monday, Lyft’s co-founders also denied that the company was in the wrong.

“From the beginning, we carefully designed the service to be in full compliance with the law,” wrote Logan Green and John Zimmer, the company’s two founders.

“Additionally, we’ve gone above and beyond current requirements by offering a first-of-its-kind $1 million excess liability insurance policy to give both drivers and passengers peace of mind. We took the letter as an opportunity to open a conversation with the CPUC and explain what we’re all about. Since receiving the letter, we’ve had productive conversations with CPUC staff about how these services greatly benefit the local community and complement existing alternatives. The Lyft community will continue to operate as we engage in this dialogue.”

So far, all the companies are continuing to operate.

"We have not received a response yet," said Terrie Prosper, a spokesperson for the CPUC. "The law provides various enforcement tools—fines, filing criminal complaints and possible imprisonment, vehicle impoundment, coordinating with other law enforcement agencies, etc."