Uber Admits to Overcharging for Rides Using Up-Front Pricing
Uber has been beset by scandals so far this year — from not shutting down during a taxi strike in New York City to a Department of Justice criminal investigation into the company's authority-evading Greyball tool. Now, in a stunning admission, Uber has confirmed that it's been routinely overcharging riders for rides.
This situation involves the "up-front pricing" method that Uber first introduced April 2016, which now operates in 14 US markets. Early on, Uber explained up-front pricing as being "calculated using the expected time and distance of the trip and local traffic, as well as how many riders and nearby drivers are using Uber at that moment."
Now Uber's position has... shifted a bit. In an interview with Bloomberg, Uber's Head of Product explains "the company applies machine-learning techniques to estimate how much groups of customers are willing to shell out for a ride." Turns out that if you're traveling from/to/between in-demand locations, Uber figures you're willing to pay more and will charge you more.
The story was originally reported by The Rideshare Guy back in September with a follow-up comprehensive analysis earlier this month using data collected during a month of a NYC driver's rides. This analysis showed that riders were overcharged on average of $1.98 per ride for UberX ($162.56 over 82 rides). In the rides analyzed, there was significant variation between the rides, from Uber losing around $10 on one ride to making an extra $35 on another.
On the flip side, the analysis found Uber heavily subsidized UberPOOL rides. For the 49 UberPOOL trips recalculated, Uber had to cough up average of $2.20 per ride to make drivers even. While the company lost money on 39 of the 49 riders, it scored a total of $86 extra from a rare triple-match.
In all of these cases, the drivers are getting paid as they agreed to: based on time and distance. So, The Rideshare Guy's title of "How Much Money are Drivers Losing from Upfront Pricing?" doesn't reflect the situation, which can be best summed up with something like "How Much Money are Riders Overpaying with Upfront Pricing?"
Is Uber in the wrong here? Riders see the price they're going to pay before agreeing to the ride; it's not like riders are being surprised with an overcharge after the ride. Plus, showing the price before beginning a trip could help avoid some of the mind-boggling charges some riders have gotten:
If Uber had just been "up front" about how it might charge you more than the standard pricing, this wouldn't be a story. Instead, it's Uber's secrecy about this pricing scheme — until The Rideshare Guy proved it was happening — and failure to stick with what it had publicly said about the pricing scheme that's concerning.
What are your thoughts on up-front pricing?
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