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Austin Battle Over Ride-Hailing Will Resound Beyond City Limits

A hard-fought Austin special election over regulations for ride-hailing companies like Uber and Lyft might signal the new normal as the companies aggressively battle to dominate the emerging industry on their own terms.

Pro and against signs of Austin's Prop 1 ride-hailing vote posted along voting centers on University of Texas at Austin's campus on April 28, 2016.

The streets of Austin are lined with campaign signs. Slick mailers are flooding mailboxes. Voters are besieged by phone calls and text messages, many paid for by a lopsided $8 million-plus campaign for an off-schedule special election to decide a single issue – who will write the rules for ride-hailing companies like Uber and Lyft in the Texas capital city. 

The outcome of Saturday's election is expected to reverberate far beyond Austin, serving as a either a case study or cautionary tale for other cities trying to forge working relationships with Uber and Lyft, who are competing to dominate the lucrative ride-hailing industry. 

Central to the battle is mandatory fingerprint background checks for vehicle-for-hire drivers. Austin, like many cities, wants them while Uber and Lyft don't. The result has been a multi-million dollar election brawl that has already seen almost 10 percent of Austin voters cast ballots early. 

Uber and Lyft have pulled out all the stops, bringing in Friday Night Lights actor Taylor Kitsch to pose for photos with early voting students at the University of Texas at Austin and to film an ad declaring: "Ridesharing is a lot like's beautiful." 

Former Austin Mayor Lee Leffingwell is also appearing in television ads backing Uber and Lyft, and received a $25,000 consulting fee from the companies' PAC, Ridesharing Works for Austin. Current Mayor Steve Adler has staked out a position firmly on the city's side.

"The degree of shock and awe of the political power that these companies can bring to bear against opponents has to be part of what they want to show, because it is such a public display of force," said Rick Claypool, research director for Public Citizen, a consumer watchdog group. "This really does seem to be uncharted territory, where a company can just have this much power just by the nature of its business."

Similar battles have been fought in cities across the country over the fingerprint background checks, but Uber and Lyft's aggressive campaign in Austin could serve as a warning for other cities looking to regulate the services.

Uber and Lyft led the petition drive to place an ordinance on the ballot preventing Austin's city council from requiring ride-hailing drivers to submit to fingerprint background checks. Both Uber and Lyft have pledged to leave the city if voters don't approve the ordinance.

Huey Rey Fischer, deputy outreach director for Ridesharing Works for Austin, a group backed exclusively by Uber and Lyft, said the issue has gripped the city because the outcome of Saturday's election, "directly impacts the quality of life for Austin and Austinites."

Read MoreAhead of Austin Election Over Uber, Local Leaders Take Sides

Uber has pushed back against local ordinances and statewide legislation in the past, but Claypool said Austin "is where the conflict between a local government and Uber has been carried the furthest." Austin's referendum marks the first time an Uber-backed proposition has gone to voters instead of being employed as leverage to pressure governing bodies to strike a compromise, he said.

The Austin City Council passed its own ordinance in December requiring drivers for ride-hailing companies to undergo fingerprint background checks. Ridesharing Works was formed in response, and launched a wide-reaching petition drive that would force the city to either adopt an ordinance with fewer regulations or put the measure to a vote. The petition garnered more than 25,000 certified signatures and the city council voted in February to put the issue before voters. 

Proposition 1's language asks voters if the city's original December ordinance should be dumped and replaced with one that would, "prohibit required fingerprinting, repeal the requirement to identify the vehicles with a distinctive emblem" and "repeal the prohibition against loading and unloading passengers in a travel lane."

Uber and Lyft have held true to their promise to bolt from other cities if they were unable to snuff fingerprint background check requirements, turning their backs on Galveston, Midland and Corpus Christi. But Houston is one of two cities in the nation where Uber has continued to operate despite local regulations requiring fingerprint background checks. Lyft left the city more than a year ago when the regulations were adopted, and now Uber is threatening to do the same. In April, the company announced it would leave Houston if the city did not repeal its existing regulations. 

Ridesharing is a lot like's beautiful.— Friday Night Lights Actor Taylor Kitsch

Houston Mayor Sylvester Turner said he found it "ironic" Uber threatened to leave the city weeks before the Austin referendum election. At a press conference after Uber's announcement, Turner pointed to the campaign in Austin and said, "let me just say to you that this is just not how we do it in the city of Houston. This is not the way to come to the table." 

Claypool said Uber and Lyft's behavior in Austin would likely become an "object lesson" for local governments considering regulating vehicle-for-hire companies.

"If they think they might get an $8 million headache for even thinking about it, it's going to have a chilling effect," he said. 

Fischer said Uber and Lyft are pushing for the ordinance because they "really want to stay in this community."

"It's not about sending messages or political gains for them," Fischer said of Uber and Lyft's intentions in Austin. "It's them defending a business model that works, that keeps Austinites safe and really works in the public interest."

The tactics and bankroll employed by the companies has spawned virulent criticism from opponents. One group, calling itself Our City, Our Safety, Our Choice, called for an investigation into the campaign during a press conference Wednesday.

"To be blunt, this campaign doesn't pass the smell test," said former Austin City Council Member Laura Morrison. "We are calling for a broad investigation of Uber and Lyft's actions to determine if they have stepped over the line from grossly inappropriate to illegality."

The group confirmed that Travis County Commissioner Brigid Shea filed a complaint with the Federal Communications Commission over text messages from Uber – messages that also spurred a class-action lawsuit against the company filed Wednesday. 

"Uber has violated the Telephone Consumer Protection Act ... by robo-texting thousands of unwanted text messages to the cell phones of thousands of Uber users in Austin, Texas – all without the prior express consent of those receiving Uber's text messages," the lawsuit reads. 

Claypool said the campaign supporting Proposition 1 troubles him because of how Uber and Lyft present themselves to voters.

"I think what's interesting is that they come in and can characterize themselves as a scrappy underdog and at the same time come in with the big advantage being a billion dollar corporation brings, to really push the regulatory environment that they want into a particular locality over any opposition that might happen locally," Claypool said. 

Disclosure: Uber and Lyft have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here. 

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