After de Blasio calls snowstorm gouging illegal, Uber still uses surge prices -- just not as horribly as usual
Here in New York City and other parts of the Northeast, the snow has begun to fall and it likely won't stop for the next 24 hours or longer. Some estimate the city will be buried in up to 30 inches of snow by late tomorrow.
For customers of Uber and Lyft, that should bring up nightmares of blizzards past when Uber's surge prices hit seven to eight times the normal rates -- or upwards of $30 a mile.
With that in mind, NYC mayor Bill de Blasio said in a press conference, “Price gouging in the context of an emergency is illegal.” In response, Uber and Lyft have capped their surge prices at 280% and 200% respectively.
The cap is a welcome gesture, but doesn't that still constitute "price gouging in the context of an emergency"? Under New York State law, price gouging is defined as an "unconscionably excessive price" during an "abnormal disruption of the market." Like many laws, there's a bit of vagueness written into that language, and I've reached out to the Attorney General's office to ask whether Uber's and Lyft's capped surge rates qualify as "unconscionably excessive" and will update the post if I hear back.
On one hand, charging double or triple the normal price for services can reasonably called excessive. On the other, the notion of a "normal" price for these services is hard-to-pin down by design. Surge pricing -- or "dynamic pricing" as Uber euphemistically calls it -- is built into these companies' models, as they algorithmically assess demand and adjust prices to ensure that there are enough drivers available to meet it. And in a situation like a blizzard where an algorithm would naturally assign a particularly high multiplier (as much as ten-times normal pricing), capping this at 2.8- and 2-times respectively could be viewed as the opposite of "unconscionably excessive."
The law aside, however, is it fair or decent to charge these prices during weather emergencies? We just had an event called "Don't Be Awful," and among the recurring themes was that just because something is lawful, it doesn't mean it's not awful. But, to play devil's advocate, the surge pricing model does offer some benefits to the consumer.
There's little question that there are fewer drivers willing to brave the weather during major emergencies. Furthermore, traffic moves more slowly which limits the number of trips each driver can take. According to the Taxi and Limousine Commission, there are on average 485,000 trips taken per day in New York City. But the day Superstorm Sandy hit, there were only 113,794 trips taken and only 72,019 taken during the blizzard of December 2010. Part of this is because people stay inside. But for the people who do require transportation -- often in the interest of their own safety -- the lack of available drivers is a major problem. And while cabs and livery cars don't artificially boost their rates during emergencies -- or at least they're not supposed to -- good luck speaking to the operator at your local car service tonight. Even if you catch somebody on the phone, good luck waiting around for the car to arrive.
With this in mind, Uber's surge pricing cap is almost commendable, although its as much a savvy PR move as anything else. It does boost prices to increase the number of drivers on the road, but it doesn't boost them as much as its algorithm normally would. And while some might argue that managing supply and demand during emergencies should be the domain of a governmental body that theoretically has the public's good in mind -- as opposed to an often ruthless for-profit company -- in this case Uber and Lyft have struck what for stranded drivers is hopefully a happy medium.
[illustration by Brad Jonas]