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Uber passengers hit with massive surge pricing
Angry customers take to social media over Uber's "surge price", after some customers were slugged with hundreds of dollars in charges. (Vision courtesy ABC News 24)
The case of a woman who was charged $720 for a $100 ride home on New Year's Eve drew the smuggest responses from the chattering classes.
An office administrator charged the cost of a return flight to Bali for a trip to Blacktown who then had the nerve to complain about it. What thigh-slapping idiocy, right?
Didn't she realise Uber's surge pricing is well known? Besides, it's simple supply and demand.
Congratulations on your recall of high school economics.
But here's a thought: we don't live in a textbook, or a weird anarcho-capitalist fever dream.
Quite the contrary.
Australian society is built on the principle of protecting consumers from making disastrous choices against their own self-interest, even when they choose to.
Want to take out a small loan?
A lot more companies would offer one if they could charge 500 per cent. But regulators have capped rates at one-tenth that amount, even if you want to sign for a worse deal.
Many said that this unfortunate passenger was told explicitly that she was in for a gouging on December 31 and so deserves no sympathy.
The app does require people to acknowledge they will pay a higher surge price.
Specifically, they must type in the number by which their regular fare will be multiplied. In this case, this required keying in the number 7.9.
That is consent, sure. But could it be clearer? Certainly.
Uber's app can already provide customers with an estimate of the cost of their fare on a separate screen. Why didn't they ask this woman to sign off on a screen that told her the fare would cost between $600-$700 instead of the more abstract concept of a multiplier?
My guess is Uber makes more money that way.
You can say buyer beware. And it's easy to if you caught your first Uber five years ago on holiday in Brooklyn before anyone here had heard of it. (They call corner stores bodegas there by the way).
But the people who invariably get stung, like our hapless protagonist, are using the app for the first time. And, yes, they might have had a few drinks too.
You can say she should have done the sums herself. But who can't relate to blithely agreeing to pages of terms and conditions before later feeling aggrieved when we find out we've granted Mark Zuckerberg the right to remotely access our camera phones when we're in the bath?
But the big question about surge pricing is whether it serves the purpose for which it is intended, which is putting more cars on the road.
Some recent research suggests that it doesn't.
One found that surge pricing mostly has the effect of moving cars around, not bringing more onto the road. It can also draw drivers away from areas where prices are rising, because they expect fewer people to buy rides at exorbitant prices. This may have the effect of making cars less available.
Would the service really be undermined if we capped surges at, say, 400 per cent?
For now it's impossible to say what the effect might be, because like so much of its operations, the way Uber's surge pricing mechanism works is not transparent.
And, as the company has expanded into new markets, it's kept squeezing to its advantage. Its commission has grown in new markets in US cities and admitted to effectively sabotaging their competitors by bombarding them with fake orders.
This happens with pricing, too.
In San Diego the company was caught boasting it had not hired new drivers to keep the supply of drivers down and trigger a surge.
It seems inevitable now that Uber will at least decimate or even kill the taxi industry.
You'd need a heart of stone not to feel a tinge of schadenfreude about that, given how unsatisfying encounters with a Sydney cab can be.
But cabs are regulated and provide something that can function like an essential public service, with a certain number reserved by law for people with disabilities or children needing a car seat.
Ordering an Uber does not make you a participant in guerilla war against the establishment. It makes you a client of a $63 billion global monolith backed by venture capital.
Its triumph is going to give it freer rein to set the price of our rides and determine the way in which that happens.
It's worth thinking again whether that's something we ought to be so glib about.