Is Uber's 'Surge' Pricing Meant to Swindle Partiers?
The story of one woman's $357, 14-mile UberX ride Saturday night in L.A. has everyone talking about "surge pricing" -- and some Angelenos now say they suspect the rideshare app took advantage of them because they had been drinking.
We talked to two L.A. UberX users who requested late-night rides following evenings of revelry last weekend. They said they had no idea the cost of getting home would be multiple times Uber's normal rate, let alone double and more than the cost of the very taxi trips they were trying to avoid.
Is Uber taking party people for a ride?
One of the godsends of so-called ride-sharing apps, in which private citizens sign up to make money on the side by providing quasi-taxi services, is that they suck some of the wallet-piercing pain out of taking a cab in this nearly 500-square-mile city.
That pain is particularly acute when you're going out on the town: Drunk driving is a contagion in L.A. because it's hard to get around such vast distances with only skeletal public transportation, especially late at night. Tales of after-hours reaming by cab drivers are not unusual.
See also: Ride-Sharing Apps Fight Back.
As it turns out, Uber has a secret sauce, an algorithm, that kicks in when rider demand is high and driver availability is low. The company tells us that surge pricing is not dependent on which hours when people get out of clubs and bars, but rather on how many bodies are requesting rides and how many drivers want to give them.
The idea is that higher prices will entice these independent contractors to hit the road at, say, at 2 a.m. when people want to get to their pillows ASAP. (Drivers usually keep about 80 percent of the fare.)
But some in L.A. suspect the startup is taking advantage of their inebriation and lack of judgment.
Consider the case case of a 23-year-old actress, who did not want her name used. She tells us she was out on the town with friends Saturday and decided to request an UberX for a ride home about 2:30 a.m.
"I had a couple drinks," she says, "and I didn't want to drive."
The actress told us she was not drunk, had her wits totally about her, and was immediately suspicious about the ride when she got home and had not been sent a digital receipt.
Uber says it usually has a multi-step process that ensures customers know what they're getting into -- a screen that must be clicked, a sobriety test that sometimes prompts users to key in the special rate multiplier, a text about the surge pricing, and a receipt. But the actress told us she believes three of those things didn't happen for her: the sobriety test, the text and the receipt.
She says she doesn't remember the special-rate screen prompt but concedes, "I most likely wasn't paying attention."
Curious about the cost of her 17-mile ride, the woman checked her bank account when she got home and discovered a $161 charge.
She later figured out that the surge pricing rate was 4.25 times the normal price. After a television reporter contacted her publicly through Twitter, she says Uber took 25 percent off her bill, swallowing more than its share of the ride's profits.
However, the 23-year-old says she'll never use the service again:
This past weekend everybody in Los Angeles was at holiday parties. Of course they're taking advantage. It's absurd. I could have hired a private car for the whole night. I deleted the app and I won't use it again.
The story was similar for Mike Shab, vice president of marketing for a local clothing company. He spent $10 for the roughly four-mile UberX ride from his residence near the Grove to his company's holiday party at the Beverly Hilton in Beverly Hills.
So, after imbibing, Shab figured the ride back would be just as painless. But it ended up costing $50, or five times the rate he had paid just a few hours earlier.
Shab tells us he doesn't remember getting a surge-price notification or having to take the online sobriety test. He said he didn't get his receipt and didn't realize until later now much he was charged:
I don't remember seeing a notification of a surge charge and I'm sure if there was I would have just clicked it and said, 'Get me my damn car.'
The time was 2:48 a.m., well within the drunk hour.
Alcohol is in your system. I definitely feel there's a lot of drunk people being taken advantage of. I'll never use them again.
Clearly, Uber is aware of the problematic combo of inebriated customers and pumped-up pricing -- when it rolled out the sobriety test safeguard in December 2012, it acknowledged it was in response to complaints.
Andrew Noyes, a spokesman for Uber, emphasizes that surge pricing allows the company to put independent drivers on the street when they want to be out, just like everyone else. "Surge pricing occurs at times of peak demand," he says. "As you can imagine, on weekends, in the evenings, people are in search of safe reliable rides."
He says the surge warnings are clear and that customers can always get an estimate of the trip's price beforehand:
I open my open my app and, if surge pricing is in effect, I would see a splash screen the size of my phone screen that says in bold print, surge pricing is in effect, this is the multiplier. You have to click through that to confirm you still want to get a ride. After that you get a text that lets you know surge pricing is in effect. After that you get a receipt.
Noyes offered to look up individual cases to prove, he says, that customers were warned and received receipts.
The app's sobriety test doesn't kick in during certain hours, he says, but rather when prices reach a certain multiplier. (He couldn't say exactly what level that was.) Users are required to key in the surge price multiplier -- 2.75 for example -- a few times before they can get their ride requests approved.
But do they know what it means? Some surge multiples are fractions, such as the aforementioned 2.75. Customers would have to memorize out the base rate, which is available, and do the math. Deciphering the true cost would be difficult for many math- (and detail-) phobic Americans, particularly the 2 a.m. set. Others might be confused, thinking the warning is about taxes or local surcharges.
"We're always looking to improve upon the product," Noyes tells the Weekly. "If people have recommendations on how to do it better, we're all ears."
Uber's astronomical surge pricing rates over the weekend prompted an outcry in snowy New York, where party people boosted demand for rides, and even here in mild L.A., where Uber is making a big bid for business by partnering with local companies to offer $20 and sometimes even $50 credits for after-holiday-party rides.
We reached out to the Golden State's two other major ride-sharing companies, Lyft and Sidecar, to see if they also implement surge pricing. Only Sidecar got back to us.
The short answer for Sidecar is no, except on New Year's Eve, when demand is through the roof, said spokeswoman Margaret Ryan. The company will charge more but it will also let drivers keep 100 percent of the fares during peak hours as an incentive to get them out there.
On that night, Ryan said, "demand is very high in L.A."
State Public Utilities Commission spokesman Christopher Chow told us that PUC regulators, which oversee the ride-app companies in California, are not looking into the price complaints.
Rick Taylor, spokesman for L.A.s Yellow Cab Co., said the surge pricing is a good example of what happens when regulators lose control of an industry.
"A lot of people don't believe in government regulation," he said, "but this is what happens when you have an out-of-control, Wall Street-funded industry ... "
The city of L.A. considered the ride-sharing concerns outlaws because they did not adhere to rules, including price limits, that govern local taxi companies. In June the L.A. Department of Transportation told the apps to stop operating on local streets.
But in September the state PUC took control of ride-app regulation and essentially said they could keep on keepin' on, even in L.A.
Taylor reminds folks they still have a choice when they stumble to the curb on Saturday night:
Thank goodness for Yellow Cab. The arrogance of Uber -- charging people in troubled conditions -- says who they really are. We view Uber as the Grinch this year. They are the takers, not the givers this holiday season.
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