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Is Uber’s surge pricing legal? Court will decide

Surge pricing benefits drivers and Uber but what about you? (Photo: Chris McGinnis)

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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5 ways to avoid surge pricing from Uber & Lyft

Researchers suggest ways to avoid Uber's surge pricing. (Image: Uber app)

Researchers suggest ways to avoid Uber’s surge pricing. (Image: Uber app)

As a business person you believe in the laws of supply and demand, right? But you might find them a little hard to swallow when they work against you — like when you hail an Uber ride from a location with high demand and limited drivers available. Because that’s when Uber’s irritating surge pricing kicks in.

Now a new study from Northeastern University suggests that savvy customers might be able to outsmart surge pricing and save themselves quite a bit on the fare.

Uber says surge pricing is determined by a proprietary algorithm that the company created; the theory is that jacking up the price in a designated area will attract more drivers there to fill the higher-than-usual demand.

But the study by researchers at Northeastern’s College of Computer and Information Science suggests that there a couple of easy ways to avoid surge pricing.

One is to wait five minutes or so; another is to walk a few blocks in an effort to put yourself into a different Uber “surge area.”

These conclusions are based on research for locations in Manhattan and San Francisco. “For example, 20 percent of the time in Times Square, customers can save 50 percent or more by being in an adjacent surge area,” they wrote. They also found that Uber’s surge pricing algorithm re-evaluates fares every five minutes, so a surge surcharge could quickly disappear.

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One difficulty: Uber doesn’t publicly divulge the boundaries of its surge areas, so a customer trying to outflank surge pricing can’t be sure how far or in which direction to walk in order to get into an adjacent area. The researchers noted that Manhattan has 16 surge areas and Boston has nine; they said they are working on a project to define where the surge areas are, and they plan to put that online.

Top tips for avoiding the surge?

1- Wait if you can. That’s because surges can be short-lived.

2- Move. Try moving your location pin around to see if you can find a nearby area outside the surge zone. Or walk across the street or to the next block.

3- Try SurgeProtector, a free app, helps find locations near you with lower or no surge pricing.

4- Share. You can also consider using UberPOOL or Lyft Line that offer flat rates, but you might have to share the seat with another rider.

5- Grab a cab. Or use a taxi app like FlyWheel for a taxicab.

How do YOU get around surge pricing? Please leave your tips below. 

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