Sharing Economy

Uber Agrees to Cap Surge Pricing During Emergencies. That Sucks for Customers and Drivers.

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iLikeSpoons/flickr

This afternoon, New York Attorney General Eric T. Schneiderman announced that the ridesharing app Uber has agreed to cap its prices during emergencies in order to comply with the state's price gouging laws.

Schneiderman seems pretty pleased with himself, and he's even got a quote from a highly domesticated version of bad-boy Uber CEO Travis Kalanick as a trophy in his press release. But Uber's customers and drivers should be pretty pissed off. 

Right now, Uber uses dynamic pricing to encourage drivers to come out when demand is high or conditions are unappealing. The app warns users that they will be paying higher prices and lets them estimate the cost of their ride before clicking the button to summon a car. But that kind of disclosure isn't enough for New York's regulators.

According to the press release

New York's law against price gouging (General Business Law §396-r), was passed in the winter of 1978-79 in response to escalating heating oil prices.  It defines an "abnormal disruption of the market" as "any change in the market, whether actual or imminently threatened, resulting from stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy, strike, civil disorder, war, military action, national or local emergency, or other cause of an abnormal disruption of the market which results in the declaration of a state of emergency by the governor."  During an abnormal disruption of the market, all parties within the chain of distribution of any essential consumer goods or services are prohibited from charging "unconscionably excessive prices." 

What this means for New Yorkers: Assuming Uber doesn't have a behind-the-scenes plan to bump driver pay in times of crisis, fewer drivers are going to heroically schlep out to the far reaches of Brooklyn when it's snowy or subway strike-y. That means customers who would be willing to pay still can't get a ride and drivers who would be willing to work will stay at home instead.

Uber CEO and co-founder Travis Kalanick said this, hinting at broader implementation nationwide: 

"This policy intends to strike the careful balance between the goal of transportation availability with community expectations of affordability during disasters. Our collaborative solution with Attorney General Schneiderman is a model for technology companies and regulators in local, state and federal government." 

Aw. So warm and fuzzy. To be fair, Kalanick was probably trying to forestall a worse deal for his company and his customers in this negotiation. 

But just as a reminder, here's Kalanick on regulators in 2012

"Every city we go to eventually the regulators will make something up to keep us from rolling out or continuing our  business," he told an audience at TC Disrupt in San Francisco….

Kalanick…waxed philosophical about what it is that drives regulators in his industry specifically. "I have been trying to understand the regulators," he said, and he'd decided that they work on three levels — none too good.

"One is cronyism," he said. "They get a Stockholm Syndrome with the folks they regulate… One even told me that they view themselves as customer support for the taxi and livery companies."

Number two: "If they don't have rules they feel it is illegal," he said. This is the knee-jerk, err-on-the-side-of-caution approach that Uber has currently been fighting.

Number three will sound familiar to anyone who has covered regulation in many other areas, like technology: "They are incredibly sensitive to what's the public view, the optics rather than the reality," Kalanick said. 

Sigh.

Bonus: Here's the super-simple system Uber will be expected to use to determine a fair price during emergencies, as described in the agreement:

Clear as mud. 

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  1. As noted in the article, the price responsiveness, which came with a notification of the estimated premium you were paying, was a benefit of Uber over more traditional transportation companies.

    Nobody was ever forced into an Uber vehicle at gunpoint and required to pay those fares.

    1. But if there’s a blizzard or a hurricane, why, it’s just like being held at gunpoint!

  2. Uber will be free to operate just as soon as they agree to become.. just another taxi company.

  3. I’m 100% sure that this will have no effect on the availability of Uber drivers during emergencies. I mean who doesn’t like to court additional risks with no attendant increase in reward?

    1. It’s not for no reward, Hugh. It’s just that now the reward will be a multiple of their base pay determined jointly by Uber and a committee of bureaucrats.

      1. It’s better if people that need to be somewhere stay where they are if the alternative is that the fee charged for their transportation changes with changed circumstances. It’s unfair for people risking their lives driving in hazardous conditions require that they be compensated for the risk they are running. That way lies madness. If we accept that premise what about all of the other price and labor control methods that suddenly come into question? How could Top Men profit from manage a situation where people are free to do and charge and pay as they please?

      2. Ah, well if decisions about how people are allowed to live their lives are being made by a gaggle of clueless assholes I guess I really have nothing to complain about.

    2. This.

  4. If they don’t have rules they feel it is illegal

    Its right there in the Declaration of Obedience, which we celebrate every July 4:

    Freedom means asking permission and following orders.

    1. Have you been reading tracts by Rick Santorum and Rudy Giuliani again?

      1. When the government’s boot is on your throat, whether it is a left boot or a right boot is of no consequence.

      2. Because they’re the only ones butting the gun to your head?

  5. This policy intends to strike the careful balance

    The free market IS a careful balance and you’re trying to strike it.

    Civil servants – all idiots.

    1. Come on, some of them are just power-hungry assholes.

      1. Don’t forget the thieves.

  6. It’s the same thing with alleged “price gouging” laws on everything else as well.

    Such as gas prices. Where I live, we had a temporary regional shortage of gas a few years ago related to a disruption of the Colonial Pipleline.

    There were long gas lines at stations and it was excaerbated by some convienence store chains in the area (notably Mapco) that decided that they just would not play the game at all and did not sell any gas during that period.

    Price gouging laws are just pandering to envy. People (and pandering politicans) would rather that everyone be equally forced to do without the commodity in question rather than have product available at a price reflective of the true scarcity based on the situation. The “rich” just should not be able to get their gas at all if other people can’t afford the price.

  7. I’m sure the New Yorkers stuck without a ride on a snowy day will be thankful to the AG for relieving them of the choice to spend an “unconscionably excessive price” to get home.

  8. 1) This could be an opening for Lyft or other ride-share companies.

    2) ‘Clear as mud’ hopefully means ‘can still implement some kind of surge-pricing’.

  9. Laws against price gouging reveal nothing more than a basic inability to comprehend the concept of supply and demand.

    If, for example, gas stations were barred from raising prices during a disaster like a hurricane, people would end up buying more gas than they need and the supply would run out, stranding other drivers.

  10. I’ve heard the screeching about ‘how unfair’ the surge pricing is, even on car sites. Unfair! UNFAIR! Stompstompstomp!

    That the pricing is completely transparent before the transaction even occurs isn’t relevant to them. Their pwecious widdle feelz have been all hurted and they want daddy to come in and beat the big, fat meanies up.

  11. Market forces are deadly forces. Is that about right?

    1. He tried to offer me a critically important service when I needed it!

    2. The third deadliest. The first two being pythons and high rocks.

  12. Couldnt uber make the price based on something other than the things listed…like supply and demand?

    Allow the price to fluctuate all the time based entirely on user demand and driver supply. Then there is no “gouging”, its just normal fluctuation.

    1. The formula seems easy…some base price for the area, it goes up whenever a user asks for a ride and down when a driver becomes available.

      If there are “enough” drivers available, it stays at the minimum price. If there is too many potential customers for the number of drivers, the price starts slowly going up until enough drivers become available to push it back down.

      The price would have to fluctuate slowly enough to prevent silly spikes. Adjust every 15 minutes by some small increment.

      I could see a normal $20 ride costing $200 after some massive event, when suddenly a few 100,000 people are leaving at once.

      1. Yes but to the logic-challenged person on the left this is all to complicated to understand.

        And to the scumbag politician and pundit on the left, it’s much easier to appeal to people’s sense of equity and fairness by calling this sound economic practice immoral and exploitative.

        After all, it just feels wrong that people who are rich might find it easier to get an Uber cab during a snowstorm than a regular person.

        Never mind that it hurts everyone to create an artificial shortage of drivers by removing the incentive to work during storms or by making it hard to accommodate a sudden spike in demand.

        1. “but to the logic-challenged person on the left this is all to complicated to understand.”

          Not just on the left. Florida’s price gouging law, for example, was passed by its GOP controlled House and Senate and signed by its GOP governor.

          1. Fair point. My attitude about this is shaped by the fact that I first read of this settlement from a Gawker website.

            1. Don’t get me wrong, I’m sure if polled the idea would be more popular with those on the left than those on the right, but sadly I think you’d find majorities for both.

          2. Who says the GOP isnt on the left?

  13. This is a strategic mistake. This makes Uber look even more like a cab company, as now Uber is really getting stuck into setting fares.

    As long as Uber can say its just a conduit for reservations and payment, it can distinguish itself from cab companies. But if it starts setting rates, exactly how does it differ from a cab company?

  14. It was a FL governor who, after a hurricane, declared generators could not be sold for more than they were before the hurricane.
    So you can bet the current stock was sold for exactly that price so long as you bought that grill over there of $X.
    And you can bet generators stayed in warehouses far away from FL, since no one could recover the shipping costs.

    1. During Hurricane Sandy, there were news articles and reports in concerned tones about generators possibly being sold for slightly higher prices or being quantity limited, yet they only briefly and passively mentioned the people who were filling up dozens gas cans and buying generators then selling them right across the street for 50%+ markups to people waiting in the long lines.

      I guess ‘price gouging’ is OK as long as you’re not a business with employees to pay and higher restock costs.

      I loved arguing with people who believed that truck drivers from farther away should brave long drives through shitty conditions to bring supplies for the same costs as when everything is just fine.

  15. You know they could instute some sort of rule to keep the market, you know, fair. It’d need a catchy name… Maybe something like, the “Dog Eat Dog Rule.”

  16. You know who else was willing to pay the price of a surge?

    1. Iron Man?

  17. OT:
    Taylor Swift thinks musicians should be paid according to, uh, something, and the WSJ proves it can rock celebs, too:

    “For Taylor Swift, the Future of Music Is a Love Story”
    http://online.wsj.com/articles…..1404763219

    1. Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It’s my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album’s price point is. I hope they don’t underestimate themselves or undervalue their art.

      Wow, just….wow. What a vapid cunt.

  18. If Uber wants to play dirty (and they should), during the next blizzard, they should assemble a mob of would-be Uber consumers at Mr. Schneiderman’s office with demands that he give them all a ride at the capped rate. Make sure the media show up.

    1. Better, when people try to get an uber and there aren’t enough, display a message in the app saying there aren’t enough ubers because new yorks silly laws and give them the option to blast off a complaint to the ag and their other officials.

  19. I HIGHLY recommend an Econtalk podcast episode with Mike Munger on the subject of price gouging. It’s the best hour you will spend today:
    http://www.econtalk.org/archiv…..ice_1.html

    Our knee-jerk abhorrence of perceived “price gouging” is one of the more interesting human phenomenon.

  20. If I read that regulation correctly, then Uber and the regulators will agree to some sort of multiple (2?) and then Uber will have control over what the “base” is. I think the verbiage is a complicated way of saying “throw out the highest three days and then take the highest price on any of the other 57 days.”

    I can’t imagine how Uber might game that system. Can you? Who wants to bet that the price of a cab between 3:52 am and 3:53 am on the 2nd and 5th Tuesday of each month is $1,000?

  21. Fuck my mayor.

    We believe our tour guide regulations are valid and they work very well. People visit Charleston largely for its history, architecture, and landmarks. They expect and assume they will be given correct information, and our tour guide regulations are designed to achieve that goal. Our ordinance requires a tour guide to be knowledgeable of where and at what times tours can be conducted, which is essential because Charleston is a living city with many residential areas woven within the fabric of our historic district. If the tour guides are not regulated, we have no way of receiving complaints and taking action to correct a guide’s misconduct or the spreading of false information.

    1. I know when I go to a new city, I look for a government-approved guide!

    2. “If you want to show people around the town as your guest, that’s fine, but if you want to be a guide for hire, I think there should be some regulation for it,” Cooper said.

      We are a nation of fucking solipsists.

    3. I took a bus tour of charleston once. He kept talking about how civic minded people were and did things for the city on their own and etc. Then he pointed out a law about building height. I asked why they needed the law if they were so civic minded. Pissed him off good.

      1. Them: 70+% of people want smoking banned in public places.

        Me:Yet few, if any, establishments ban smoking.

        Them: Because they don’t want to upset smokers.

        Me:But they’ll upset non-smokers?

        Them (a) Whatever, you just don’t understand.
        Them (b) Oh Fuck You. Why don’t you go suck on your little cancer sticks and die already?

  22. Good news from the front lines of the War on Dogs:

    1 in 4 Memphis Cops Call in Sick.

    1. These “sick strikes” are fraud, plain and simple. Fraud by the cop, who is claiming a benefit he’s not entitled to, and fraud by the doctor who certifies he is sick when he isn’t.

      Since this is fraud on the government, the penalties range from draconian to obliterating. Sure would be nice to see a crusading prosecutor take this on. I don’t think the cops will get their usual abject tongue-bath from the media or the public.

  23. Hmmm.

    This sucks, but I think there’s a workaround. A separate priority car service (call it Hyper), otherwise identical to Uber, that sets its base rate at something significantly higher than Uber’s cap. Hyper doesn’t do much business under normal circumstances, but under conditions where Uber hits its cap, hey, you can get a car from Hyper.

    1. I like the way you loophole, DRM.

    2. I like it too. And hyper happens to be a wholly owned subsidiary of uber. Like cadillac and chevrolet are both GM.

  24. OT:

    Bank makes error, customer doesn’t correct error, spends like a politician (which includes bouncing checks).

    http://www.kob.com/article/sto…..7yLTUBQPNs

    … Hobbit

  25. Look, price and wage controls gave us the health care costs and employer provided health insurance that we all enjoy today. Why won’t they be just as effective at reforming Uber, you son of ass bitch stupid fascist anarchist moron libertarians?!

  26. Pussies. The attacks, lawsuits, and negative press are all working. Soon Uber will be no more or less than the current taxi and black car services, and then will cease to exist.

  27. So voters don’t understand that price controls artificially reduce supply by eliminating the incentive to produce?

    Paging Bryan Caplan.

  28. I think I like the sound of that.

    http://www.WentAnon.tk

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