Hawaii Capping Uber Surge Pricing: What Does this Mean for the Industry?
Lawmakers in Hawaii delivered a severe blow to the ride-sharing industry with new legislation that puts a cap on “surge pricing.” Honolulu is the first city to restrict how much money ride-sharing companies, such as Lyft and Uber, can charge consumers during times when demand is high. The legislation, officially called Bill 35, prohibits the companies from charging higher rates during rush hour, severe weather, and major events or concerts.
One Councilwoman who voted in favor of the limits, Kymberly Marcos Pine, voiced her concern when sailors from the U.S. Navy were given rates as high as $221 to travel from Pearl Harbor to Waikiki. By comparison, cab fare was only $44 for the same distance. A spokesperson for Uber said that the trip, which never actually occurred, was during an extremely busy time and for a higher priced-tier of rides in the “Uber Select” program instead of the basic rate.
Lyft and Uber both argue that the market shouldn’t be concerned with price gouging because customers know how much the ride costs before they book it so there are no surprises at the end of the trip. A driver for Uber, Michael Goodman, agrees that people don’t want to pay more during busy times, but they see the prices before requesting a ride.
This pricing model enables Lyft and Uber to encourage more drivers to work during periods of high demand, creating more options while taxicabs are limited by the size of their fleet and drivers available during those hours. Surge pricing was a significant factor in 38 percent of drivers deciding to work during those hours. The incentive increases how many drivers are on the road, reliability, and reduces wait times for customers. Eliminating that incentive for drivers would negate these benefits and lead to less reliable transportation options
Tabatha Chow, senior operations manager for Uber in Hawaii, notes that there hasn’t been a single complaint in the city about the structure of pricing. If the bill passes, innovation decreases and consumers are left with fewer choices for services. Adrian Durbin from Lyft said that if the law passes, customers would have less access to reliable and safe rides that they depend on for their day-to-day activities.
The bill creates an interesting perspective for the ride-sharing industry, but transportation experts don’t foresee other cities implementing similar legislation. A transportation policy expert with experience working at Uber, Pete Gould, stated that price caps were implemented when the concept of ride-sharing was new to the market. Surge pricing presented itself as an issue before Uber and Lyft entered the market with upfront pricing. Customers can see how much a ride costs without experiencing shock when they arrive at their destination and have to pay a fare exponentially higher than they expected. Customers embraced the transparency ride-sharing companies provided.
Both Massachusetts and New York have laws that prevent ride services from increasing rates during natural disasters or states of emergency to protect consumers from price gouging practices. Both companies responded to the legislation by announcing that they have their caps in place for natural disasters, storms, or other emergencies where demand for transportation is high. Cities are moving on and examining other issues related to ride-sharing services such as taxation and the rights of drivers, who are independent contractors and self-employed, to collectively bargain.
Gould described the law as an attempt to level the playing field between taxis and ride-sharing services but noted that attempts to do it was taxis failed, and it was unfair to limit consumer choices. He ended by exclaiming that the policy is something that could have been an issue in 2015, but it’s long past that in 2018 and there is no need for debate.
Mayor Kirk Caldwell has ten days to sign the bill and make it a law, veto it, or allow it to sit and become law by default without his signature.
Lisa contributes all sorts of content to Deal Meisters, with a special interest in food related topics. A true foodie at heart, in her free time Lisa enjoys cooking, trying new local restaurants, creative writing, and relaxing at the beach.
Photo credit to tshein at Flickr.