What happens when you go from “hot” to “not” because someone comes along with a new idea? Many companies might see the writing on the wall and find more innovative ways to deliver their product. Not so for several embittered taxicab companies. In cities like New York, they are turning to government protection and cronyism to protect them from competition by changing the rules and making it difficult or impossible for ridesharing companies.

But this probably won’t be decisive in the long run. Market signals are loud and clear. Consumer choice is shifting from hailing cabs by hand to swiping and tapping our smartphones to secure rides.

As we’ve reported, the value of taxicab medallions is falling. Chicago, home to the country's second biggest fleet of roughly 7,000 taxis, saw its median sale price for a medallion skyrocket to $357,000 in late 2013 from around $70,000 in 2007. In Q1 of this year, the median price has fallen back to about $270,000. Cities like New York, Boston, and Philadelphia have seen similar declines.

While riders are shifting from cabs to ridesharing options, medallion values are falling. Some taxi drivers are defecting from taxis to other options such as driving for Uber.

However, because the majority of medallions in big cities like Chicago and New York are owned by investors and companies that rent them out to drivers, as drivers disappear so do their revenues and their ability to repay their own loans. Like cars and homes, medallions can be repossessed.

CNBC reports:

Until recently in America's big cities, purchasing a taxi medallion—the city-issued license to operate cabs —was about as sound of an investment as they come.

But with the rise of Uber and other ridesharing services, the value of taxi medallions are plummeting, leading cabbies and fleet owners throughout the USA worried that their industry will be decimated if local and state government doesn't intervene.

In New York, taxi mogul Evgeny Friedman is locked in a court battle with Citibank, to whom he owes some $31 million after some medallion loans matured.

Citibank is looking to seize 87 of Freidman's 900 medallions in New York, which has seen medallion prices drop to about $870,000 last fall from a peak of about $1.2 million last spring. Freidman, the biggest medallion owner in the USA, also owns fleets in Boston, Chicago, New Orleans, and Philadelphia.

In an April letter to creditors, New York taxi commission officials and other stakeholders, Freidman's attorney, Brett Berman, called on industry regulators and medallion lenders to restructure and extend loans for his client and reform the industry.

"If you want to ensure that medallion industry nationwide continues to operate, if you want to have services available to riders that don't have iPhones, if you want to have drivers that are vetted, then there's going to have to be a major change nationwide and city-by-city in terms of how they're going about enforcing the rules," said Ronn Torossian, a spokesman for Freidman.

Earlier this month, Medallion Financial Group—one of the country's largest creditors to medallion owners—reported in its financial disclosures that nearly 4.1% of its loans were late 31 days or more in the first three months of 2015, up from 2.2% in the previous quarter.

We certainly understand the plight of people affected by transitions in the transportation industry. But it is not up to government to make sure taxi services remain available to people without iPhones. If there is a profit in selling rides to people without IPhones, companies must find will do deliver the service or create other ways to ensure that their services remain attractive . But instead of innovating to remain relevant, taxi companies are turning to lobbying lawmakers and smearing their competitors.  

For example, the trade association Taxicab, Limousine and Paratransit Association (TLPA) has launched a media nationwide campaign called "Who's Driving You?" that maintains a long list of alleged crimes and embarrassing incidents caused by drivers of ridesharing companies. If ridesharing companies respond by making their services better, then the “Who’s Driving You?” list could have a positive effect.

Still, the campaign does look like a desperate last-ditch effort to smear the competition instead of competing with it. Many taxi companies are behind the legislative and regulatory shut-down efforts of local and state governments. The power of consumer choice and drivers following the dollar is too powerful.

At present, fair markets seem to be giving government tampering in the marketplace a run for the money.