New Year’s Eve traditionally is a time of fun and celebration. However for some, it is also time for drinking and driving and DUIs. Here in Michigan, and across the United States, share riding companies like Uber and Lyft have grown in popularity as a way to travel safely.
With the touch of a button on a smart phone, a user can order a car to get a ride home or to the next destination. Uber in particular has grown sharply in popularity, with some estimating the company is now worth close to $50 billion.
But one of the side effects of Uber has been it’s opaque and clumsy pricing system. Oftentimes riders have no idea how much a ride or fare may cost. This becomes an even bigger problem during big drinking nights, such as New Year’s Eve. As the competition for fares increase, Uber drivers are allowed to charge more for their rides. Sometimes many times more than normal.
This fare system is known as Uber’s “surge pricing policy.” Surge pricing is an automatic mechanism that charges customers in certain areas more money during high-traffic times when cars are busier than normal.
Surge pricing was in full effect this past New Years. There were reports all over the country and even Canada showing users were charged up to 10x more than normal for a ride. Users who usually would pay $20 for a fare were charged more than $200 to their credit card, with many rides only lasting a few short miles. There was even a user in Edmonton, Canada who paid over $1,100 for a fare.
Uber responded to the complaints and backlash claiming that 60% of New Year’s Eve rides were not affected by surge pricing. Still, by Uber’s own admission some 40% of users, probably users in most major cities, were gouged by its surge pricing policy this holiday season.
This pricing policy did not sit well with customers or myself. I understand an increase in demand means an increase in prices. That’s Economics 101. But Uber and its cadre of drivers took full advantage of its customers this past weekend. Taxi cab companies are not allowed to charge more than a certain rate for a fare. Uber drivers and other share riding programs should also adhere to this same regulation. Further, many users had no idea what they were being charged until the service was incurred. Again, this disingenuous and degrading to customers.
Uber has no plans to get rid of surge pricing. However, if you like to make sure you are not a victim – guess what – there’s an app for that too. It’s called Cut the Surge and it’s available at cutthesurge.com.