Uber has already polarized the public as a result of its clashes with taxi regulators in several big cities. Then the day after Sandy, the limo-summoning service doubled the price of a ride in New York City. And now, the PR maelstrom has made landfall.
In a blog post today, Uber says it has no choice but to double fares in order to convince the maximum number of drivers to get on the road. The company calls this "surge pricing." Uber paints surge pricing as serving the greater good by leaving fewer people stranded while public transit in the city is still so spotty.
"Without raising the price, there will be less than half the number of drivers on the system with several times more demand on far fewer drivers. Without Surge Pricing, Uber would become essentially unusable this week," the company says.
To avoid accusations of price-gouging, the company yesterday started paying drivers double while still charging riders the regular fare. But by then it was too late. Paul Carr over on PandoDaily reamed Uber and cited warnings from New York and New Jersey officials to to portray surge pricing as no different from a New York City bodega charging $5 for a bottle of water after the storm that would normally cost $2.50.
"Uber’s response to Sandy gives a useful foretaste of what (Uber CEO) Travis Kalanick has in mind when he promotes his utopian ideal of a totally unregulated cab market," Carr writes.
Kalanick told Wired via e-mail that Uber's regular surge pricing policy — that is, a doubled fare charged to the rider — was in effect for 45 minutes yesterday before the company switched over to charging the 1x fare while still paying drivers double. He says that all riders who were charged double yesterday are getting refunds today.
At the same time, Uber says on its blog that it couldn't sustain that policy today because they were simply losing too much money — $100,000 on the day, to be exact. The company says it will continue to waive the 20 percent cut it typically takes, and let the entire fare go to the driver.
Whether "surge pricing" equals gouging is a question that ultimately the legal system will have to decide. But the free market will likely weigh in sooner. Tech PR vet Brooke Hammerling observes:
In a great Planet Money post on the broader question of post-disaster gouging, Jacob Goldstein points to a famous study that found most people didn't care if raising prices significantly in times of scarcity were the quickest path to curbing that scarcity. Nobel laureate Daniel Kahneman found that people said they considered such price hikes unfair and that they would punish businesses that engaged in the practice. If Kahneman's thesis holds, Uber may find itself still digging out from Sandy's aftermath long after the subways start running again.
