Uber’s New Year’s Eve surge pricing fallout highlights challenges of unregulated services

[The Uber app is seen on a smartphone. photo: CBC]

Some Uber users got a rude lesson in the workings of an unregulated free market over the holiday season. They found themselves paying the equivalent of a transcontinental airline flight for a ride across town with the ride-sharing service during New Year’s Eve festivities.

One Uber user in Edmonton said he was billed more than $1,100 to get home after sharing a car with some other revelers. Uber refunded some of it and the man admitted he was drunk and not paying much attention to the surge-pricing information on his smartphone. But the final tab was still sobering.

The grousing wasn’t limited to Canadian Uber users. American customers also took to Twitter to complain about being charged up to 10 times the normal rate.

Welcome to the dark side of a service highly touted by its users for convenience and reliability. The downside: it gets expensive when Uber’s supply and demand algorithm kicks in.

The Consumers’ Association of Canada logged more than 50 complaints about Uber over the holiday period, president Bruce Cran told Yahoo Canada. That compares with about a half-dozen for the rest of 2015.

Some users said the final cost of their ride was far higher than the estimate for the trip quoted on their Uber app.

“The only way they found out was when they looked up their credit card or they looked it up on their Uber account,” said Cran. “You should be able to get a quote for any service and that quote should stand.”

Cran said some complained the surge price was jacked up between the time they got in the car and when they reached their destination.

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It’s something Uber spokeswoman Susie Heath strongly denies.

“Also in terms of the rate changing … riders are notified of the multiplier and are asked to confirm and accept the increased fare,” she said in an email exchange. “The multiplier they have agreed to remains in place for the duration of the trip.”

No changes planned to surge-pricing, Uber says

Uber issued a number of refunds after receiving complaints but there are no plans to tweak the software-driven surge-pricing element of its app. The company insists it uses several methods to inform users about surge pricing so they can make informed decisions about using the service, including email blasts and in the case of New Year’s Eve, a rider guide sent out in the days leading up to the big night.

“We’re always looking for ways to continue to educate the public on how to keep costs down during peak times,” said Heath.

Surge pricing aims to ensure there are enough Uber cars available during busy times, she said.

“When more people need rides than there are drivers on the road, surge pricing incentivizes drivers to offer rides where and when they are needed most,” said Heath. “Riders are repeatedly notified about the pricing directly within the app and asked to confirm and accept increased fares, or can opt for a notification when prices drop.”

But the complaints suggest some people still don’t get it. Whose fault is that? Cran said it’s Uber’s if the price quote actually did differ from the final charge.

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But a look through Twitter suggests not everyone sympathizes with the morning-after kvetching. Why complain if you willingly accepted Uber’s estimate, some tweeted. People also had the option of finding cheaper ways to get home such as public transit (which is free in many cities on New Year’s Eve), or a cab. In any case, an Uber bill is cheaper than a DUI charge, some said.

Surge pricing came under sharp criticism in 2014 when Uber was forced to apologize for charging the multiplier rate to customers fleeing a deadly siege by a gunman in downtown Sydney, Australia. It admitted it should have moved quickly to suspend surge pricing during the crisis.

[Taxi drivers assemble for a protest, in Toronto, on June 1, 2015. photo: CP]

Uber and taxi sector starkly different business models

The controversy starkly highlights the difference between a wide-open service such as Uber and the tightly regulated taxi industry.

Cabbies are not allowed to jack up their rates during peak demand periods. But regulations also limit the number of licensed taxis that can operate, reducing the chances you’ll get one when things are busy such as on weekends or during New Year’s Eve festivities.

Vancouver, which so far has prevented Uber from operating until the provincial government amends regulations to make licensing easier for ride-sharing services, has a notorious reputation for poor late-night taxi service in its downtown entertainment district. Officials have moved to increase the number of temporary licences to improve weekend service but still balks at allowing suburban cabs to pick up fares downtown.

The taxi industry was quick to jump on the New Year’s Eve bleating as evidence Uber shouldn’t be allowed to operate freely. But the taxi business is hardly trouble-free. Toronto regulators, for instance, fielded 1,400 complaints from taxi customers in 2014.

ALSO READ: Why doesn’t everybody love Uber?

Cran said he believes competition from Uber and similar services will force a rationalization of the taxi business, hopefully to reform the licensing and regulation systems that make operating a cab expensive.

But he’d also like to see a cap on Uber’s surge-pricing system so users are not gouged unduly. His association plans to meet with Ontario’s Consumer Protection branch in February and also hopes to talk to David Orazietti, minister of government and consumer services.

“As a matter of fairness there must be something required of them here,” said Cran.

But the consumer advocate consumer-protection laws in most provinces are not very strong. That makes the buyer-beware principle all the more important when using a service like Uber.