NEW YORK • New York City has become the first major American city to halt new vehicle licences for ride-hailing services, dealing a significant setback to Uber in its largest market in the United States.
The legislation passed overwhelmingly by the City Council on Wednesday will cap the number of for-hire vehicles for a year while the city studies the booming industry. It also allows New York to set a minimum pay rate for drivers.
Uber has become one of Silicon Valley's biggest success stories and changed the way people across the globe get around. But it has faced increased scrutiny from government regulators and struggled to overcome its image as a company determined to grow at all costs with little regard for its impact on cities.
New York's move to restrict the number of ride-hailing vehicles and to establish pay rules for drivers - another step no other major city has taken - could provide a model for other governments that want to rein in the industry.
The city's aggressive stance also raises questions over how fast Uber can continue to grow as the company - valued at US$62 billion (S$84.5 billion) - plans to move towards an initial public offering next year.
The proposal to cap ride-hailing services led to a clash among interest groups, with taxi industry officials saying the companies were dooming their business and Uber mounting a major advertising campaign to make the case that yellow cabs have a history of discriminating against people of colour.
Mayor Bill de Blasio and City Council Speaker Corey Johnson said the legislation will curtail the worsening traffic on the streets and improve low driver wages.
"We are pausing the issuance of new licences in an industry that has been allowed to proliferate without any appropriate check or regulation," Mr Johnson said before the vote, adding that the rules would not diminish existing service for New Yorkers who rely on ride-hailing apps.
Many cabbies and Uber drivers say they support the cap proposal. They hope it will halt the flood of new vehicles clogging city streets and allow them to make more trips and improve their earnings.
Mr de Blasio praised the Bills and said he planned to sign them into law. The cap on new for-hire vehicles would take effect immediately.
"More than 100,000 workers and their families will see an immediate benefit from this legislation," Mr de Blasio said, referring to the city's army of for-hire drivers. "And this action will stop the influx of cars contributing to the congestion grinding our streets to a halt."
But Uber has warned its riders that the cap could produce higher prices and longer wait times for passengers if the company cannot keep up with the growing demand.
Ride-hailing apps have become a crucial backup option for New Yorkers swept up in the constant delays on the city's sputtering subway, as happened on Wednesday when signal problems again snarled train lines across a large swathe of the city. Ride-hailing services have also grown in neighbourhoods outside Manhattan where the subway does not reach.
Uber and Lyft, the second most popular app in New York, criticised the City Council's decision. Uber said it would work to keep up with the increasing appeal of its service despite the limit on new vehicles.
"The city's 12-month pause on new vehicle licences will threaten one of the few reliable transportation options while doing nothing to fix the subways or ease congestion," Uber spokesman Josh Gold said in a statement.
Mr Joseph Okpaku, a vice-president at Lyft, said in a statement: "These sweeping cuts to transportation will bring New Yorkers back to an era of struggling to get a ride, particularly for communities of colour and in the outer boroughs."