Uber’s use of surge pricing came under fire again last week when one Halloween reveler took an Uber Black (the company’s higher end option) to get a 20-minute ride home for a grand total of $362.57. When she ordered the ride, she agreed to pay “9x” the usual fare but could not see what the final total would be until after arriving at her destination.

The story of the trick-or-treater’s travails went viral after she created a GoFundMe page and solicited donations from friends and family to help pay the high charge, which came as a surprise when she woke up the next morning to a near empty bank account.

Sympathizers and critics were quick to comment, some decrying the unfairness of a 9x surge price that was likely misunderstood by a tipsy Halloween partygoer, others arguing that a high Uber bill is no different from any other impulse decision a person might later regret.

Alison Griswold at Slate, adhering to strict supply and demand economics said of the high charge:

“But there were definitely others who were willing to pay it. If there weren’t, Uber wouldn’t have been charging so much.”

Griswold’s view highlights the distinction between state-regulated taxi services and the start up app provider. While Uber can increase its pricing according to market demand, as much as 9x the normal rate as seen above, the same is not true for taxi drivers, who are required by law to give a consistent price.

Amidst allegations of the company price gouging during holidays like Halloween and New Year’s Eve, looking back at Uber’s 2012 PR nightmare from Hurricane Sandy offers further insight into this year’s Halloween scare. In the wake of Hurricane Sandy when transportation was scarce, Uber fares in New York City spiked to 8x their normal cost. Public lament over the surge pricing was widespread, prompting New York Attorney General Eric Schneiderman to consider prosecuting Uber for violation of state price gouging laws that are designed to keep necessary goods, like gas, available to the public during natural disasters. As a result of the AG’s investigation, Uber announced a nationwide emergency policy to limit surge pricing during disasters.

But back to Halloween. Was charging $362 for a 20-minute ride, price gouging in the legal sense? Put simply, not if a natural disaster or in many states, a declared state of emergency was not also happening at the same time. As of this writing, 34 states have anti-gouging laws in place; however, only the State of Michigan has a gouging statute in effect regardless of a state of emergency. Mich. Stat. Ann. § 445.903(z) prohibits prices that are “grossly in excess” of the price at which similar property and/or services are sold. Since our costumed protagonist was in Maryland, which actually has no price gouging statutes in place, she was out of luck in pursuing a price gouging action, leaving her stuck with more tricks than treats.

Chelsea Fitzgerald

 


 

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2 Responses to The Uber Halloween Story: Price Gouging or Harmless Trick?

  1. Lauren C. Ostberg says:

    Oh, but Chelsea, the story goes on! She made her funding goal on GoFundMe–solicitation for microloans, a subtler, and therefore ultimately coercive, form of gouging?–and reiterated, in an interview with the Baltimore City Paper, that she assented to the 9X surge pricing without knowing how much it would actually cost.
    It’s interesting (and, obviously, economically advantageous) that Uber relies on a proxy for price rather than a price itself. It keeps users (especially users who have been drinking!) from internalizing the cost, which makes it even easier to impulse purchase.

  2. Joshua Sureck says:

    Interesting article, Chelsea. In my opinion, in these price surge scenarios, it would be more fair if Uber supplied an estimate of the total cost before the trip. The estimate could be based on the amount of miles to the destination or time in which the trip will take. Regret may still ensue for these Uber users, but at least at the time of the impulse decision, one would have a better opportunity to weigh the costs with the benefits of the service.