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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Ok ya, I misread Dan’s proposal. I see your point, tho I’m still skeptical.
Dan didn’t talk about the passenger bidding. I can see the potential for an app where I request a drive to the airport and within 1 minute, I have three prices from three drivers within 5 minutes from my house. I’ll chose the one with the best combination of car, rating and price if the price is similar to or cheaper than Uber. I already find myself checking Lyft for a better price when Uber’s surge factor is too high. It may not be for everyone, but I think there’s a market for this on longer trips. And some customers are more price sensitive than others.
Ya but Dan’s idea isn’t a better product or service! People want to get from A to B simply and easily. Who wants to guess how much to bid, and then have to wait around while they see if someone accepts, and then guess again with a higher bid? Just cause someone has a new idea doesn’t make it a good idea!
Uber wouldn’t switch. But just like Uber disrupted the Taxi companies with a better, more efficient model, new entrants could do the same to Uber. The beauty of innovation and competition where we all end up with better products and services. In Uber’s case, the drivers win as well as technology increases their utilization rate (ie less downtime).
Huh? Uber’s model is incredibly successful, popular and profitable. Why would they throw it all away to switch to your crazy scheme?
What a ridiculous lawsuit. Surge pricing is simple supply and demand. If that’s illegal then the entire US economy is illegal
I bet within a few years all app-based transportation will follow a new model. You enter a destination and all available drivers within a certain radius will bid on the fare to take you there. You can see the driver’s bid and overall rating, and then you pick the best deal. Drivers won’t like this one bit, but titanic market forces are at work here.