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Los Angeles, San Francisco threaten ride-sharing companies with legal action

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Ted S. Warren/AP/File

(Read caption) Katie Baranyuk, gets out of a car driven by Dara Jenkins, a driver for the ride-sharing service Lyft, after getting a ride to downtown Seattle to meet friends after work, March 12, 2014.

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It's hard out there in the sharing economy. 

Regulators in California have threatened the ride-sharing service Sidecar with a letter saying the company is violating California business law. 

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In the letter, which said it would halt Sidecar's operation, the district attorneys of Los Angeles and San Francisco accused Sidecar of violating a state law that says multiple people cannot be charged for the same ride. It also said Sidecar has misled users on the extent to which it checks drivers' backgrounds. 

Similar letters were also sent to Uber and Lyft, The Wall Street Journal reported. 

Ride-sharing companies let users order rides through an application on their smart phones, and their drivers use their own personal vehicles. But local governments and the taxi industry in major cities have grown wary as these services have taken off in recent years. Further, rider safety also continues to be an issue. For example, Uber has recently faced a series of sexual assault charges; in July, an Uber driver was charged with sexually assaulting a passenger in Washington, D.C.

Companies like Uber and Lyft have faced resistance around the world. Earlier this month, Germany banned Uber in one of the most severe restrictions the company has faced since being founded in 2009. However, the ban has since been lifted. Protests against Uber have ranged from the streets of Boston to European capitals like London and Paris. Taxi drivers argue it does not follow local taxi rules and does not require its drivers to meet proper licensing and safety regulations. Although Uber is by no means the only ride-sharing service, it has typically been the focus of criticism because of its vast size and global reach – its services are in more than 100 cities in 45 countries and it has been valued at around $17 billion. 

But not every city is opposed: On Friday, it was reported that the city council in Austin, Texas has approved temporary rules to allow companies like Uber and Lyft to operate. 

The move this week by California regulators is especially noteworthy: Not only are smaller companies being singled out – Lyft and Sidecar were both founded in 2012 and have nowhere the scope or the wealth of Uber – but they are being targeted in California, the innovation capital and home to Silicon Valley. 

"We value innovation and new modes of providing service to the public," San Francisco District Attorney George Gascon said in a statement. "However, we need to make sure the safety and well-being of consumers are adequately protected in the process." 

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The California district attorneys said that Uber, Lyft, and Sidecar have performed sub-par background checks on drivers that fail to properly screen out people with past driving violations and criminal offenses.  

In response to criticism, ride-sharing services argue they should not be regulated by government's outdated rules. 

"The district attorneys are trying to enforce laws written for limousines, in an era before smartphones," a Sidecar spokeswoman said in a statement. "Sidecar will continue to operate and expand Shared Rides."