surge pricing

Uber Caps Surge Pricing During Emergencies Nationwide

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Uber is doing away with its practice of charging exorbitant rates for transportation during emergencies in the U.S., the company confirmed today. While its new caps on surge pricing during those times were first announced through a partnership with the state of New York, the company will follow the same policy nationwide.

NY Attorney General Eric T. Schneiderman announced via Twitter (and email) that the state had reached an agreement with the on-demand ride-sharing company to limit prices during “abnormal disruptions in the market.” The deal essentially marks the end to Uber’s practice of instituting “surge pricing” during events like emergencies and national disasters.

For years, Uber has been knocked for its dynamic pricing model, which increases the fares passengers pay in periods of high demand. Typically, that will include major holidays and events like New Year’s Eve, when large numbers of people are trying to travel all at once. But it also frequently extends to regular commute times.

The problem is when Uber has instituted surge pricing during emergencies, which limits access to only those who can pay for exorbitant rates to get around. During those times, its practice of “surge pricing” constitutes “price gouging” according to New York law (see below).

New York’s law against price gouging (General Business Law §396-r), was passed in the winter of 1978-79 in response to escalating heating oil prices. It defines an “abnormal disruption of the market” as “any change in the market, whether actual or imminently threatened, resulting from stress of weather, convulsion of nature, failure or shortage of electric power or other source of energy, strike, civil disorder, war, military action, national or local emergency, or other cause of an abnormal disruption of the market which results in the declaration of a state of emergency by the governor.” During an abnormal disruption of the market, all parties within the chain of distribution of any essential consumer goods or services are prohibited from charging “unconscionably excessive prices.”

Uber announced the change in a blog post that also highlighted the company’s partnership with the American Red Cross. During emergencies, the company will donate all commissions on surge trips, or 20 percent of the total fare, will be donated to the charity’s disaster relief efforts.