Surge pricing benefits drivers and Uber but what about you? (Photo: Chris McGinnis)
Uber has revolutionized ground transportation costs with its “surge pricing,” which requires passengers to pay more during periods of heavy demand. But a federal judge in New York has opened up the possibility that surge pricing might be a violation of antitrust law.
U.S. District Judge Jed Rakoff refused to throw out an antitrust suit against Uber CEO Travis Kalanick that was filed by disgruntled passengers. In his ruling, Rakoff suggested that Uber’s use of Kalanick’s surge pricing algorithm to set fares for all drivers in a given area could be viewed as a price-fixing conspiracy, especially since Uber considers its drivers to be independent operators rather than employees.
If the Uber drivers really were independent, the court reasoned, they would be competing against each other on price instead of all raising their prices in lockstep when Uber’s algorithm told them to do so.
Uber itself was not named as a defendant. The plaintiffs are seeking class action status for the suit on behalf of Uber users nationwide, but the court has not yet ruled on that application.
“Today’s decision confirms that apps are not exempt from the antitrust laws,” a lawyer for the plaintiffs told Reuters.
Don’t expect surge pricing to disappear any time soon. This, like most of the many lawsuits filed against Uber, will likely fade away over time.
Don’t like surge pricing? Here are some ways to get around it: 5 ways to avoid surge pricing from Uber & Lyft
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