Uber, Lyft drivers manipulate fares at DCA causing artificial price surges

https://wjla.com/news/local/uber-and-lyft-drivers-fares-at-reagan-national

by edtechstrats • 7 years ago

252 290 7 years ago

wjla.com

_Microft• 7 years ago

As Charles Munger said "Show me the incentive and I will show you the outcome".

hn_throwaway_99• 7 years ago

That's one clever way to unionize...

gdhbcc• 7 years ago

I dont see how Lyft gets off calling this fraudulent. Seems to me it's the system working as intended, and as it should.

Drivers dont want to drive for under a certain value, so they simply inform the app who adjusts the value to fulfill demand. Seems like its what you want to happen.

mikeash10• 7 years ago

And it’s not like Uber and Lyft are a monopoly. Taxis are available, and there are roughly eighteen million private car services in the area.

i_am_proteus2• 7 years ago

And it only works as long as all of the drivers in an area agree: one or two drivers who don't join the scheme, and it doesn't work.

metalliqaz6• 7 years ago

Not all. The large majority, but not all. There are very likely one or two drivers in the area that don't participate, simply because they aren't in the parking lot at the moment they orchestrate the mass logout. Surge pricing is about supply and demand, so if expected demand is high (like at an airport) they need a lot more than one or two drivers.

ardy422• 7 years ago

And it only works as long as all of the drivers in an area agree: one or two drivers who don't join the scheme, and it doesn't work.

That's much easier to organize at an airport than elsewhere, since all the drivers are required to gather together in an airport waiting area.

asdff5• 7 years ago

If one or two drivers pick up the fair before the surge they are good for 15+ minutes of being not at the airport driving someone someplace, then the surge can just happen then after they leave.

ardy422• 7 years ago

I dont see how Lyft gets off calling this fraudulent.

The workers are "defrauding" Capital out of greater-than-substance wages. It's bullshit, and they'll try to re-frame in in terms of customers, but that's essentially their view.

richardknop4• 7 years ago

Well, Lyft drivers are supposed to be contractors, it's normal for contractors to set their rate so I don't see how this is fraudulent.

Jeff_Brown3• 7 years ago

Not exactly. The percentage that Lyft takes is the same, so Lyft actually makes more money from these price-hikes. The ones suffering are the passengers.

bobwaycott• 7 years ago

I believe you mean subsistence, not substance.

NotPaidToPost4• 7 years ago

This seems the very definition of fraud, though.

Edit:

Fraudulent: "intended to deceive someone in order to get money or property".

The collusion is intended to deceive Lyft (and in the end customers) for financial gains.

eropple20• 7 years ago

By leveraging the supply controls, which are explicitly theirs to use to communicate willingness to take on work, in a two-sided market where you're not allowed to directly set prices? Please substantiate how that is fraudulent.

If Lyft and Uber allowed direct pricing, this wouldn't happen. Drivers would set the price they're willing to work for. Instead, drivers--who, once more for emphasis, are supposed to use price fluctuations as incentive or disincentive for working, that's what "surge pricing" was in the first place--only have one message that they can send: "nope, not at that price".

Or they can be obligated to work cheap because rich people demand their labor.

Hrm. I think I now understand where the claim of "fraud" comes from.

ma2rten• 7 years ago

I don't know if I would call it fraud, but I can see where they are coming form. Drivers aren't individually deciding to turn off the app, but they are doing it collectively to manipulate the app into surge pricing.

dnautics4• 7 years ago

Its not clear to me that Lyft is calling the behavior fraudulent. That's a sketchy AF quote-out-of-context by wjla.

Konnstann• 7 years ago

"On average, Lyft drivers earn over $20 per hour."

I wonder if this figure takes into account all the waiting time, or just driving time on the app. If it is the latter, then that's a pretty scummy thing to say, considering that most drivers spend less than a third of the time actually driving people to their destination, putting the actual number closer to 7.00 an hour.

lexs2• 7 years ago

Also does that include repairs, depreciation, insurance etc. of the car? What about fuel?

metalliqaz6• 7 years ago

It does not.

Dirlewanger• 7 years ago

It doesn't. After expenses/taxes deducted, they're making less than minimum wage. To me this just shows how much financially illiterate many Americans are; zero foresight beyond the amount in their bank account at any given moment.

rco87862• 7 years ago

It does not, and it should not.

kubatyszko• 7 years ago

I've had rides that cost me $15 and took 45 minutes, the math does not add up at all. In fact, I commute with Lyft nearly every day and my average 40 minute ride costs somewhere around $20. Even with another ride directly like mine it's unlikely there's enough earnings within an hour to cover Lyft's fees and pay the driver $20...

icebraining4• 7 years ago

Uber and Lyft are both losing money for a reason, though.

rco87862• 7 years ago

Why not? Figure the driver takes 10 min to pick up another passenger. That’s another 10 min worth of driving and we’ll just say it all goes to Lyft. Driver makes $20, Lyft makes $5, 10 minutes are “wasted”.

rjf722• 7 years ago

The hourly rated is based on the time that the app is active. So that hourly rated would include wasted time waiting for customer, driving to pick them up, etc.

duxup4• 7 years ago

I feel like that's like the truck driver like stories where they'd talk about driver shortages and trouble finding new drivers and then quote average pay that is for someone with 10 or 15 years experience and pay you only get at the top shippers or working direct for a big company.

sixQuarks• 7 years ago

Uber/Lyft probably knew this was going on already, but since it increases revenue, probably was looking the other way. It’s going to be hard to ignore this now that it’s getting media attention.

giaour• 7 years ago

As much as I would be displeased if my fare were manipulated, I can only blame Uber and Lyft for this. They created an incentive for drivers to act as a unit, and groups of drivers are figuring it out. Really makes you long for the transparent, posted pricing of municipal taxis

mikeash10• 7 years ago

The taxis are still available if you’d rather use them.

klausjensen• 7 years ago

> Really makes you long for the transparent, posted pricing of municipal taxis

...Absolutely not.

I live in Malta, where Uber does not exist, but similar services do + local regulated taxis.

It is extremely clear who gets a rating and who does not give a f### about reputation and repeat business.

The only ones who use the real taxis here are tourists. I don't know anybody local (expat or native), who would use the "real" taxi company.

la_barba2• 7 years ago

Taxi's are not allowed to price gouge, they also cannot refuse you service, etc, etc. I don't see that as a bad thing.

icebraining4• 7 years ago

Uber/Lyft prices are totally transparent: they show you the fixed price before the ride.

Meanwhile, municipal taxis may not have been able to charge more per minute and/or unit of distance, but they could control how many of those units the ride took.

umeshunni• 7 years ago

Really makes you long for the transparent, posted pricing of municipal taxis

Did I miss a sarcasm tag?

Analemma_• 7 years ago

In most cities I've been to, the local taxi service has fixed fares for trips to/from the airport.

deweller• 7 years ago

They can’t afford to pickup people at Reagan for $4 in rush hour traffic.

Are they really getting paid $4 to give someone a ride? That seems so low that drivers would be incentivized to find another job.

mikeash10• 7 years ago

I think that’s the airport pickup fee that gets added on top of the standard time/mileage fare.

Waterluvian3• 7 years ago

I'm not sure if the number is accurate but I do know how amazingly stubborn humans can be in finding a new job. I've had people refuse to quit a job that they groan about every day when I've offered them almost double the salary to work elsewhere with far better terms.

Humans are risk averse and those who live paycheck to paycheck are especially so. It defies logic until you consider that their fear of the unknown + small chance they end up with no job has a massive adjustment weight applied to it in their minds.

mruts• 7 years ago

Maybe that’s all true, but it doesn’t really make sense for Uber/Lyft. They could go back to their job driving whenever they wanted.

iamtheworstdev• 7 years ago

It has a massive cost if it doesn't work out too. We're talking about an income bracket that could miss, say, one credit card payment minimum then due to a raise in the minimum for missing, probably miss the next. Situations like this are posted on reddit.com/r/personalfinance all of the time.

It's the same reason municipalities are dropping jail time for unpaid fines, etc, as hourly workers that miss one day of work unexpectedly are often fired and then end up in even more financial misfortune.

asdff5• 7 years ago

I've never met a lyft/uber driver who did it full time. Most of the people doing it need the work but can't manage committing to adding a full third shift to their life on top of their other job because they have kids/a dependent/class or just got laid off and are trying to stretch their savings while looking for work, and need the flexibility.

wlesieutre3• 7 years ago

News flash: if you go out of your way to classify your entire workforce as contractors, you don't get to decide when they work or not. It turns out this has consequences on both sides.

If Lyft wants to decide when their drivers are working, there's a process for this:

1) Hire employees

2) Give them a schedule

3) Pay them hourly plus mileage

lexs2• 7 years ago

And suddenly Uber/Lyft are like any other Taxi company just with a massive valuation.

madeofpalk• 7 years ago

Exactly.

metalliqaz6• 7 years ago

If their workforce suddenly switched from contractor to employee, I expect that valuation would evaporate.

wlesieutre3• 7 years ago

There's probably a balance to be struck, because part of the ridesharing design's efficiency is that if demand drops they can drop their rates paid to drivers, and the drivers who don't want to drive at those prices will stop.

So if Lyft starts to say "we always want X drivers available as a base load, and we'll open up to contractors to fill in the demand spikes" it might make the contractor role too unreliable for anyone to bother doing it. At the very least, their costs would go up for both the employed drivers and the extra contractor drivers. Since their valuations comes mainly from a cheap labor pool, that presumably kills it.

But in the current situation, if all their drivers at the airport sign off and say "I'm not driving at these prices," you get surge pricing to make it worth driving, that increases costs too. That's what happens when you're buying labor from independent contractors - if they don't want to sell it to you at a particular time for any reason, they don't have to.

The real question here is "If Lyft recognizes when these organized sign-offs are happening, calls their bluff, and refuses to activate surge pricing, what happens?"

Do the drivers really refuse to drive at the regular pricing and go home? Or do they all give in to a more tamper-resistant algorithm and keep driving at regular rates?

neaanopri• 7 years ago

Well, not for long...

joering2• 7 years ago

Not quite. Real taxi corporations have approval of city/state assembly to do business so that they control the amount of taxi cars being part of daily street flow. (Im ignoring the fact that this system is broken and corrupted)

seanmcdirmid• 7 years ago

And suddenly Uber/Lyft are like any other Taxi company just with a massive valuation.

What taxi companies have drivers as actual employees and not independent contractors?

uxp100• 7 years ago

I think they'd retain some of that valuation. Unlike traditional cabs, they show up (I've been stranded by more cabs called by phone then I've taken, not hyperbole). But the value of some unified dispatcher framework, with penalties for abandoning customers probably isn't in the tens of billions. Maybe in the hundreds of millions? Either self driving cars change everything, quite quickly, or some people are going to lose a lot of money.

toss1• 7 years ago

"And suddenly Uber/Lyft are like any other Taxi company just with a massive valuation." . . . which valuation would be rapidly evaporating.

I suspect this will happen one way or the other, as something that cannot be sustained will not be -- something's got to give, either rates will go up, costs will go down, or the companies will fold.

Rates probably have some room to rise. My limited experience is mostly airport rides, where they are cheaper than limo's taxis. But I'd still pay the same as the competing services, since Lyft has always been more reliable and pleasant. The main competition is parking.

Lower costs? I don't think so, short of automation. The drivers' costs & compensation have already evidently been pushed to the limit, as they are starting to strike.

Will they sort out either? I'm not buying either stock, even at the discount prices...

megy• 7 years ago

any other Taxi company

Except world wide (or us wide).

chrismeller4• 7 years ago

I find it hard to agree. Hear me out...

They are contractors because they do not have any set obligation for time. Rate of pay or overall pay has nothing at all to do with that. According to the IRS they do not have a set schedule and they are contractors (that is 1099, not W2).

So they are contractors. What does that have to do with pay? Absolutely nothing. You want x and are willing to pay y. Maybe there’s an opportunity for me to negotiate for z, maybe not. Either way none of that has anything to do with the actual form of employment. Even if I were a salaried employee working 40 hours a week the company has a budget of $40,000 a year and that’s all they will pay. If I demand $45,000 they’ll just tell me no - they simply don’t have the money.

In this case Uber offered you $x. You agreed to $x. You have no schedule, which is the perk of the job vs driving a cab, where you will have a schedule. Need to take the kids to school or a doctor’s appointment? Well, work that around your work schedule.

And as for your third point... Uber already charges me for both time and mileage. I don’t see any problem with them paying their drivers based on both... but from the drivers I’ve talked to they already do. I can’t speak for any other service at all.

jakelazaroff6• 7 years ago

In this case Uber offered you $x. You agreed to $x.

When did they agree on $X? There's no contract between the drivers and Uber stating they they will work for a given amount.

The app sets rates based on supply and demand. Uber offers them $X. The drivers decide they don't want to work for less than $Y. If demand is sufficient, Uber eventually offers them $Y.

Surge pricing is basically a negotiation between company and driver. Just because the drivers have found a case in which they have extra leverage doesn't make it wrong or fraudulent.

human20190310• 7 years ago

In this case Uber offered you $x. You agreed to $x.

The value of x was established under different circumstances. What's wrong with bumping that to 1.5x as soon as you have the power to do so?

When the cab industry was "the system", Uber and Lyft beat the system and made money. Now the drivers are beating the Uber/Lyft system and making money.

Viva disruption.

EDIT: Actually Uber/Lyft beat the cab system and lost money, but that's another kettle of fish.

thrill2• 7 years ago

You have not agreed to 'x' until you accept the ride - and either the driver or the rider can cancel the engagement without penalty for a few minutes after the acceptance.

richardknop4• 7 years ago

In this case Uber offered you $x. You agreed to $x.

This is not true. Uber and drivers did not sign any contract specifying set rate.

Every ride that is offered to drivers has price based on supply/demand. Drivers are free to cancel jobs if they feel the offered rate is too low.

thatoneuser• 7 years ago

Plenty of contractors have set hours and come into an office. Several friends in software contracting firms for example do that. Also uber doesn't agree to pay you a damn thing. You could literally go work for 4 hours and make <$10.

wlesieutre3• 7 years ago

They are contractors because they do not have any set obligation for time. Rate of pay or overall pay has nothing at all to do with that. According to the IRS they do not have a set schedule and they are contractors (that is 1099, not W2).

I'm not saying they're not contractors, I'm saying if Uber wants drivers who will work at a specific constant rate instead of signing out and demanding surge rates before they'll sign back in, then that's too bad for Uber. They created a market for driver contractors, and the drivers are participating in it. If they want shift employees who are obligated to stay logged in when a plane lands, they can hire some.

In this case Uber offered you $x. You agreed to $x. You have no schedule, which is the perk of the job vs driving a cab, where you will have a schedule.

It's working exactly as intended then, Uber offers $x, drivers say "I'm not interested in driving for $x." Uber automatically counters with "Fine, I'll pay you $y."

Uber could make their system more hesitant to offering surge pricing after a bunch of drivers sign out like this, but when it comes down to it this isn't even a strike. The drivers haven't agreed to take fares at the lower rate, and Uber isn't entitled to their labor at any particular cost. They can all go home if they want to.

And as for your third point... Uber already charges me for both time and mileage. I don’t see any problem with them paying their drivers based on both... but from the drivers I’ve talked to they already do. I can’t speak for any other service at all.

My point is that if Uber wants drivers a fixed particular price than then their "everyone is contractors" solution isn't appropriate. They can hire employees on an hourly wage to take shifts where they're paid whether or not they're currently driving a fare (mileage on top of that is to cover vehicle expenses). Sometimes they'll be busy, other times they'll have a slow night.

They don't get to have their cheap no strings attached driver arrangement cake and then also whine when drivers sign off and prices spike.

frgtpsswrdlame• 7 years ago

Seems to me that if they're contractors they should have the ability to set their own rates. What's unfortunate is that they have to trick the app.

shereadsthenews• 7 years ago

If Uber was a true platform with sellers able to ask for a price the wouldn't need this indirect means of influencing it.

papln7• 7 years ago

That's not true. The cabbies would still need a way to pressure each other to not accept lower fares.

Waterluvian3• 7 years ago

I can think of a ton of technical ways Uber and Lyft can combat this. And they probably will. And they'll be short term happy and long term foolish. Because they're treating the symptoms, not the cause.

lallysingh• 7 years ago

They just have to keep treating symptoms until they can sell their equity + options.

metalliqaz6• 7 years ago

Their hands may be a bit tied on addressing this issue, because if they start rejecting drivers based on when they choose to work, it's hard to call them contractors.

jfengel• 7 years ago

Isn't that exactly what you get to do with contractors? One of your criteria in picking a contractor is showing up. Kind of a problem, I'm told, with housing contractors.

And as with housing contractors, the best way to get them to show up is to offer more money than their other offers.

rjf722• 7 years ago

I assume you're proposing that the cause is 'low' wages. So let's say drivers earned an average of $50/hour. This would put them in an income bracket such that they earn more than 95% of Americans. Do you think that people would not then exploit a legal angle to bump their earn up to let's say $70/hour, if they found out a way to do so?

codedokode5• 7 years ago

Then a standard taxi would be cheaper.

rurp• 7 years ago

Once you account for self employment tax, gas, wear and tear on the car, and a total lack of job benefits, an Uber driving being paid $50/hour probably makes less than someone getting paid $25/hour in a steady job. For sure they would be making wayyy less than the top %5 of Americans.

blakesterz• 7 years ago

I don't quite understand this:

"The lot fills with 120 to 150 drivers sometimes for hours, waiting for the busy evening rush. "

Are they saying drivers site and wait for hours to do this?

metalliqaz6• 7 years ago

That's what happens at airports. The drivers are there anyway. While they wait, they coordinate to increase pricing just before an airplane drops off a bunch of passengers.

lr5• 7 years ago

Some people actually do not want to be at home (I once had a taxi driver who drove us from Manhattan to Brooklyn, then waited for us to go home, hours later, all the while texting his family that he had to keep working).

Also, leaving the car turned off and waiting in a lucrative parking lot saves gas, wear and tear on the car, and drastically decreases the opportunities to get into an accident. All in all, it is not a bad plan. Taxi drivers have done this for years (which is, ironically, probably one of reasons Uber got started in the first place -- in SF it was almost impossible to get a cab, because so many cabbies just wanted to get airport fares).

papln7• 7 years ago

The driver could be doing elance and mechanical turk work while waiting for your ride home!

htk• 7 years ago

I personally believe that driver's compensation is a valid discussion, but defrauding the system is not the way to do it. Uber/Lyft should just carefully identify and ban the cheaters and the lesson should spread as efficiently as the planning to cheat.

mikeash10• 7 years ago

How is it fraud?

bena5• 7 years ago

I would imagine he sees it as fraud because these are drivers who are ready and willing to drive and are waiting on fares but are not indicated on the app as so.

So when someone uses the app to find out about nearby rides, it shows no one, then it ups the rate to try and lure further drivers. Or the few drivers that are on the app currently. Then when the price is "right", all the waiting cars turn on the app at once to get the "surge" price.

These people are exploiting the rules of the system to violate the spirit of the system. The more available cars, the lower the price.

The more people find out that drivers are doing this, the more likely some form of retaliation will follow.

Either users will just start using cabs again because the price is no different or they'll do something else. Like give default bad reviews to any airport trip that they suspect of manipulating surge pricing.

eropple20• 7 years ago

They're not cheating. They're on-demand service providers providing services on-demand to on-demand consumers and they're acting according to the spirit of their agreement with Lyft and Uber--"I don't want to drive for less than $X, so I won't, and I'll wait for you to offer the money I do want."

So, with that more correct understanding of the world, your post amounts to this: "I believe that driver's compensation is a valid discussion, but only on the terms of the people holding capital and the majority of the power."

It's not a good take, dude.

francisofascii• 7 years ago

Sounds like a cartel. Where parties mutually agree to cut supply to keep prices at a certain level.

ianhawes• 7 years ago

You forgot the kicker to the definition of a cartel: "restricting competition".

The events in the article do not indicate that they are somehow prohibiting other drivers from accessing the platform. While it's certainly possible they're strong arming the drivers at the airport, overall they're not restricting someone from signing up to become a Lyft or Uber driver.

tzs• 7 years ago

I wonder if this is legal?

With the drivers classified as independent contractors rather than employees would cooperation between drivers to manipulate prices run afoul of antitrust law?

codedokode5• 7 years ago

Is not a ridesharing company the one who sets and manipulates the prices?

exabrial2• 7 years ago

This is hilarious. Props to the drivers. Capitalism at it's finest: assumption of information imbalance.

If uber and lyft do nothing, this behavior will autocorrect itself: expect a few drivers to rebel/revolt after the news of the behavior spreads. Keeping the secret will get harder and harder.

zentiggr2• 7 years ago

But it doesn't have to be secret, ad defectors only hurt themselves by accepting lower pay for the same fare. That seems like a strong incentive to play along.

exabrial2• 7 years ago

Exactly, but at some price point, for a certain individual, the acceptance of the lower fair is a better deal to bc of a guaranteed outcome.

Causality1• 7 years ago

Seems like a small software tweak is all it would take to obliterate this tactic, like updating surge pricing every time a driver logged in.

lr5• 7 years ago

The whole point of surge pricing is to get more drivers on the street. If they decrease it that quickly, then there is zero incentive for a driver to leave their house and get in their car and get out on the street, because by the time they do that, the prices are back down.

sly010• 7 years ago

In fact I am surprised it reacts as fast as the article describes.

papln7• 7 years ago

Uber can predict that the drivers are at the airport -- they were logged in when they dropped off a fare, possibly when they were already in line at the cab stand, and also Uber can use a bit of common sense.

asdff5• 7 years ago

I'm fine with it. Airports are the worst sort of fares a driver could take, people could get dropped off deep in the suburbs and the driver has to take 20 mins to get back to the city where people are actually calling rides. Occasionally these distant drivers will try to snipe me too while they are out there, probably hoping I'm too drunk to notice that they will take 20 mins to arrive. It's fickle work.

cypherpunks01• 7 years ago

This is really curious, in that it appears to be a normal strike for higher wages, except it's being coordinated on an hourly basis for just a few minutes until the company agrees to pay more!

Contractors can decide when and how they want to work, and therefore determine the price at which to sell their labor at, so to me it seems they are simply exercising their rights here. Like others have mentioned, if most drivers don't choose to participate, then this "scheme" wouldn't function.

rosege• 7 years ago

Not 100% sure I'd call it a strike but its just the free market working quickly. I have a feeling though this will spread around the world and be adapted by drivers in many other countries. I've traveled a bit in South America and Uber drivers there really do earn barely anything - I dont know how they afford the gas - e.g. 1/2 hour trip for $3-$4.

laken• 7 years ago

I've also traveled in South America and relied on Uber heavily. I talked with a few drivers, and they all found Uber to actually be worth it. For example, Colombia's minimum wage when converted to 40hrs/wk/month comes out to ~$1.50/hr. It's not a bad gig there, and the cost of living is relatively low. The bigger problem is the danger of driving for Uber, as taxistas are not a fan of Uber drivers.

peterwwillis• 7 years ago

The only economic model that make Uber and Lyft make sense is if drivers are willing to take low pay (considering all their other costs). If they make more money than cab drivers, the whole model falls apart, because then cabs will be cheaper and the service won't be competitive. (Granted, the lack of having to pay for medallions saves them a bunch of money)

I think the only long-term business plan that makes sense for them is black cars, or people who don't want the hassle of Taxis.

sundaeofshock• 7 years ago

Keep in mind that uber was successful early on not because of price, but because it was significantly more reliable then a cab. I was willing to pay a bit more then a cab to get to the airport because I knew I could count on that uber to arrive at my house on time.

Uber and Lyft are not trying to be cost competitive with cabs; they are trying to be cost competitive with public transit.

taormina• 7 years ago

I'm still convinced that the only innovation that ever happened in this space by Uber was the guaranteed ride. They chose to fight (ok, ignore) the taxi regulations, but from a features perspective the taxi apps already did all this. The difference was that any random person off the street could still flag your cab so in practice you rarely got a taxi if you weren't in a "hot spot". Reliability matters.

jermaustin12• 7 years ago

I'm not a lawyer, nor do I agree with what I'm about to say, but the drivers need to be careful, because they might run afoul of collusion.

Since they are all independent contractors, they are "rivals" in the same industry, so with all of them cooperating to increase fares for their benefit (and based on my understanding of the law), they are technically colluding.

ceejayoz2• 7 years ago

They should just form a union. Contractors can form one - they don't get all the privileges (for example, the employer isn't legally required to bargain with them, and can retaliate against strikes) but it'd probably permit this sort of short-term work stoppage.

jermaustin12• 7 years ago

Depends on the state, but federally, independent contractors are excluded from the right to form or participate in unions as defined by the National Labor Relations Act.

EDIT: independent contractors are excluded from the protections of their union actions.

jakelazaroff6• 7 years ago

That's an interesting take. Someone else in the thread likened it to a strike for higher wages, happening multiple times in a night. I wonder where the line is between that and collusion?

codedokode5• 7 years ago

But are they allowed to set a price? If the app doesn't allow them to do it then maybe it is slightly different story. Maybe it is Uber of Lyft who manipulates the prices by punishing those who doesn't want to accept low-cost rides.

return12• 7 years ago

Is that illegal? They can always claim it's not collusion because anyone can join uber and set another price - They are not stopping anyone from doing that. (also it seems almost trivial to fix this with a change in algorithm)

radcon2• 7 years ago

This seems like it could also torpedo their Contractor vs. Employee argument.

Contractors get to set rates, employees don't. So you can't say they're contractors AND accuse them of committing fraud when they try to set their own rates.

Now if only someone would develop an app that does this for entire cities. The app could be their version of a union.

leereeves• 7 years ago

Under the theory that Uber/Lyft employees are contractors and allowed to set prices, wouldn't coordinating ("conspiring") to do so en masse be considered price fixing?

Personally I think they should be considered employees, but a pro-management federal prosecutor could make some trouble for them.

dpflan• 7 years ago

This is an interesting dynamic - the colluding drivers wait for Lyft/Uber to determine the surge pricing and the point-person for the drivers informs of the price increase to a target that is acceptable. Now how does the pricing affect the demand for the rides? Will a Lyft user switch to Uber if the collusion is affecting only 1 application (vice versa too)?

codedokode5• 7 years ago

I don't think they are allowed to set prices. Furthermore, they are probably somehow punished if they don't accept the orders that app offers.

eropple20• 7 years ago

That's an interesting question. I'm not a lawyer, but I'd be interested in the answer. From a technical perspective it seems that they'd need significantly more control over product liquidity generally, rather than locally, for it to apply; from a moral perspective it doesn't seem like a reasonable appellation at all and that the closest equivalent is labor organization--and it's worth noting that companies are not obligated to negotiate with labor organizations on behalf of contractors in the same way they are employees, but contractors are allowed to organize. Contractor labor, such as SAG, IATSE, etc. do it regularly.

Practically, the impact of a hundred airport drivers deciding to "strike" is so small that a non-mendacious prosecutor probably wouldn't even look at it. But there's a lot of mendacity around Washington, so who knows.

Tade0• 7 years ago

At least in Uber's case this seems to have been an emergent thing originally, as in: drivers independently of each other found under which conditions the prices were surging and acted appropriately.

return12• 7 years ago

Assuming that it is, can they do something about it ?

rayiner4• 7 years ago

I think you can make an argument that it’s bid rigging. Uber/Lyft pricing can be viewed as an auction where the surge price is the market clearing price. Conspiring with others to not accept bids below a floor could probably be prosecuted as a bid rigging conspiracy.

i_am_proteus2• 7 years ago

Is it considered price-fixing if a union that works mostly contracts (e.g. electricians) sets a labor price? This seems to be a standard practice.

Jommi2• 7 years ago

Why do you think they should be employees?

radcon2• 7 years ago

On that note, does it make a difference that they're collectively refusing work rather than collectively setting prices? Uber and Lyft are still the ones actually setting the price.

In the end I don't think it will matter, Uber and Lyft could probably code around this pretty easily if it started to affect their bottom line. When they see 100+ drivers in the same place go offline within X seconds of each other, it's a pretty clear indication that there's coordinated action taking place. They probably have enough data from drivers' phones to see that they're sitting still waiting to go back online.

I just hope they don't decide to make an example out of these drivers by banning them...

askafriend• 7 years ago

Taxi Cab Drivers were not employees either.

Why do Uber and Lyft need to take on the drivers as employees all of a sudden? I'm not saying they shouldn't be, but just curious why the seemingly sudden change in opinion from some people?

chrischen2• 7 years ago

A union is basically collusion/price fixing.

mikeryan2• 7 years ago

Contractors get to set rates, employees don't. So you can't say they're contractors AND accuse them of committing fraud when they try to set their own rates.

This isn't how it works? Rates of pay are mutually agreed upon between an employer and employee regardless of classification.

thebradbain4• 7 years ago

I think the pro-labor argument is Uber doesn’t even consider / allow negotiating their standard contract for rate-setting.

IIRC Microsoft got in trouble in the early 2000s for doing something similar in having separate standardized pay-scales for contractors depending on how long they’ve contracted with Microsoft, and no option to negotiate, and the labor board argued that Microsoft was trying to shoehorn contractor-employment law into employee roles without the legal protections and tax burdens of employment rights

learc832• 7 years ago

They're not just talking about how much of the fee that drivers get to keep, but the rate they charge riders.

Uber sees itself as an “agent” acting to connect the actual “merchant,” the driver, and the customer. [1]

Under the theory Uber is operating on, it's weird that drivers can't directly set rates with riders.

1. https://www.marketwatch.com/story/uber-an-early-adopter-of-n...

ryandrake• 7 years ago

This is basically the contractor setting his rate... through an interface that the app designers did not specifically design for.

If a driver wants to work for $20, and the offered rate is currently $10, what’s the difference between them a) typing $20 into a text field and hitting a “request” button vs. b) turning a switch off and waiting for the app to increment the rate little by little up to $20?

kdot• 7 years ago

What's the rational for percentage based fees? The technology cost for a 4 mile ride is the same for a 50 mile ride.

eropple20• 7 years ago

"Because they can."

That's really all they (and, to be honest, most "marketplace" tech companies) need to say. They have the customers; here are our terms. It kinda really sucks, because the quality incentive goes out the window.

Donald• 7 years ago

An imbalance of power between a a $70 billion dollar company like Uber and folks who need an extra $200/week to make rent.

Also keep in mind that even at these fee levels, Uber and Lyft are somehow not profitable.

icebraining4• 7 years ago

The technology cost for a 4 mile ride is the same for a 50 mile ride.

Technically no, the real-time tracking requires constant data streaming to and from their servers, proportional to the duration of the ride.

But a more likely answer is that a fixed amount per ride makes short rides prohibitive or at least less appealing.

And if you think about it, much of the costs are probably fixed (across all rides), so you could say they should charge $millions to the first ride, then just charge marginal costs for the others. Dilution of costs across purchases is an indispensable part of doing business.

Jommi2• 7 years ago

It's not just percentage based. There is a fixed booking fee sometimes as well.

asdff5• 7 years ago

Some cities seem to get far better rates too. In Boston most of my trips were around $4-5, maybe closer to $15 to get to logan. When I was in Columbus it was like the trips were arbitrarily twice as much, hovering $7-10 for similar distances. Miami probably had the highest rates I've experienced (Like $25+ to get to the other side of the biscayne bay), traffic was terrible as well so I wasn't as shocked, but it seemed much higher than going a similar distance in LA. I was still able to get rides in 10 minutes in most cases everywhere, so it wasn't for lack of free drivers, it seemed.

calvinbhai• 7 years ago

This is an age old hack. I'm not sure why this is being reported as new.

They did this since the early days of Surge Pricing.

duxup4• 7 years ago

This seems like a logical outcome considering the company and contractors have an increasingly disconnected and at times adversarial relationship.

The entire gig economy is based on shifting risk onto the contractor (demand changes, benefits, protections regarding injury / illness)... and to some extent onto the consumer too.

ackbar03• 7 years ago

Oh man these guys think this is fraudulent? They should come to China. When rebates were all the rage, where the ride hailing companies would pay drivers subsidies, they developed software that could fake the GPS address on the phone and pick up fake rides without actually driving and get massive rebates

CPLX• 7 years ago

When low paid workers coordinate their efforts to increase their pay it's called an "artificial price surge" and allegations of fraud are thrown around.

When highly paid executives, investors, and board members coordinate their efforts to increase their pay what does the media call it?

iscrewyou• 7 years ago

innovation

6gvONxR4sf7o• 7 years ago

Price fixing, predatory pricing, bid rigging, collusion.

zentiggr2• 7 years ago

VC driven exit strategy

kevinmgranger• 7 years ago

Indeed. I never understood how coordinated bargaining is "artificial" but the decisions about how much profit goes towards the workers versus executives is somehow... "natural"?

hawaiian• 7 years ago

Growth

klyrs2• 7 years ago

Neat trick that shareholders hate!

rrival• 7 years ago

Experienced this at LAX - another driver called my driver, commenting "It's at 3.5!!" - well played, I don't fault them for this at all.

codedokode5• 7 years ago

I don't like the word "manipulating". It is like a trade union negotiating better terms. If they do it voluntarily without intimidating the drivers then I don't see any problem. They should not feel guilty.

Also, in a Lyft's statement:

Over 75% drive less than 10 hours a week to supplement existing jobs.

I wonder, are those 75% working part-time or full-time? It must be tiring driving 2 more hours after 9-hour working day.

llamataboot2• 7 years ago

Few things interesting here -

One is that the workers are getting paid more per the algorithm that these companies designed to charge customers - that is, they are getting the company to facilitate higher payments but the company itself isn't being charged more! So in that case, the drivers are simply arguing that uber/lyft are artificially undervaluing their time because clearly these passengers are willing to pay 15% more to them to get home...

It is telling to me how often Lyft/Uber/et all emphasize that their philosophy is that these gig economy jobs are just something you do a tiny bit extra to get some extra cash in your pocket. That is they are designed to be a small supplement to the job that provides you with most of your income, so hey, we don't really have to worry about working conditions, etc.

But I'm not sure I believe their stats. Over the past few years it is nearly 100% of the drivers I get that are doing it full-time, and many/most of the "teacher moonlighting for extra vacation money" type drivers have given way to lots of former actual taxi drivers who quit their taxi company and now work both uber/lyft.

nabergh• 7 years ago

I wouldn't be so convinced that passengers are willing to pay these surge prices to go home. Sure, the first time a passenger encounters this artificial surge, they're already planning on taking uber/lyft home so they'll pay it because they probably don't have another option immediately available. But the next time a passenger arrives at DCA (could be a month or two), they might remember uber/lyft is expensive when they land so they would have arranged a different option to leave the airport. Consumer reaction to prices changes may not always be immediate. These drivers are operating in their own interest in the short term but who knows if they are in the long term.

cpitman2• 7 years ago

100%. I fly out of DCA/IAD, and each time weigh the options of parking at the airport and taking a rideshare service. Last time I used Uber from DCA it was much more expensive than I expected, and have been parking there since.

llamataboot2• 7 years ago

Well, there's always the immediate option of a regular taxi!

But yes, sure, who knows, but isn't that the point the free market fundamentalists often make about price clearing? Supply and demand will somewhere theoretically clear each other and maybe it's always a dance around that spot, but in this case the drivers are using the algorithm to try to find the best price they can get for their service, rather than let Uber/Lyft determine it artificially.

I just don't understand why when capital sets the "price" of labor, it is considered free market ("No one forces anyone to drive for Lyft") even though many people literally have a choice between working or starving, which isn't much of a "free choice". But when labor tries mechanisms to find a new price, it's "collusion" and "gaming the system"

After all, even in this, there is always room for "defectors" to take the passengers that wouldn't use the higher rate!

KWD• 7 years ago

First time I encountered surge pricing on a return flight (almost doubled the normal fare) is when I started looking at airport parking again. I then discovered I could prepay parking (DFW) and it is 30-50% off normal rate (and several times during special promotions I only paid $6/day). On short trips Uber/Lyft would actually be more than airport parking. For a week long trip it would be comparable, but that is assuming not impacted by surge pricing again.

I still use Uber/Lyft at my destination (paying close attention to rate), but at home, never again.

zone411• 7 years ago

All this discussion about employee/contractor situation or possible collusion won't matter after Uber/Lyft close this loophole and this can be done easily. It makes no sense that the drivers would allow the reporter to publicize this trick.

dmbaggett2• 7 years ago

I've definitely experienced this at DCA, and it's worth nothing as well that it sometimes take hours to get out of the airport due to the insane traffic jams right around the terminals and in the parking garages. DCA has gone from my favorite airport to literally my least favorite over the last year or so. I've been using Dulles instead even though it's way less convenient.

Terretta• 7 years ago

I’m trying to figure out how to define “way less convenient” in a way that has you choosing to use it instead. :-)

dmbaggett2• 7 years ago

It's many miles farther -- but I then don't get stuck at the airport for two hours Friday night. Also, DCA is great when you're inside while IAD is the usual huge-airport security nightmare.

momokoko2• 7 years ago

DCA is also one of the easiest airports in the US to access the metro(public transit) out of the terminal. Is there a reason you just don't hop on the yellow line and get off at a less congested stop closer to your final destination?

cpitman2• 7 years ago

Metro's hours are usually the problem for me, usually getting to the airport after the last train has left.

mimixco• 7 years ago

Both companies claim that drivers are independent contractors who can drive when and where they want, so how can they say that these drivers are in violation of anything?

awake• 7 years ago

I’ve heard about this tactic from people working at Uber years ago. I think they’re aware that it happens. The way it was described to me is the Ubers are in a line at the airport and each car signs off except the very first. That way rides keep coming and the first person in line gets surge pricing

papln7• 7 years ago

This seems easy to fix on Uber/Lyft's side --- to recognize that they don't need to maintain book depth. At the airport, since passengers are effectively queued up.

Shivetya• 7 years ago

I have no issue with them not being available and having rates go up. that is what they system should do. I know uber/lyft drivers that turn off the app after drops off in areas they like being so that they don't get prompted to take a nearby fare.

I do find it annoying that these drivers are upset at the fees. Look, before then all you could do is work for a taxi service and they make uber and lyft look like saints for the most part. you are free to work for whomever you want and you got into the deal knowing what it was.

jakelazaroff6• 7 years ago

You are free to ride with whomever you want, and you got into the deal knowing what it was.

This cuts both ways, though. Taxis still exist! If you don't want to take Uber or Lyft, you are free to take a normal taxi, use public transportation, arrange your own ride, etc.

diminoten• 7 years ago

Or use one of the dozens of local competitors that are popping up.

rmrfrmrf• 7 years ago

Unionization and striking for the gig economy. You love to see it!

bradleybuda• 7 years ago

I’ve always been fascinated by the way Uber has implemented their market dynamics using surge pricing. Uber isn’t a market for rides in the way that, say, a stock exchange is a market for stocks. There aren’t drivers setting their asking price and riders making bids, nor is there an order book where matches are made at a clearing price, and understandably so - I can’t imagine how to build a comprehensible UX around a “true” bid-ask marketplace.

Instead, Uber presumably has historic estimates of the supply and demand curves at different locations, different times of the week, different passenger / rider populations (business travelers or tourists?) and then uses the measured “true” supply and demand to find a clearing price, and therefore decide whether or not a market is going to surge.

The UX of surge is important too - the raison d’être of surge pricing is to bring more drivers to an undersupplied market. That means that when you detect a supply or demand shock that would lead to surge pricing, you want to increase the surge as quickly as possible to send out the “we need more drivers” signal, because there’s a latency in getting more supply (drivers have to relocate). Conversely, Uber doesn’t want to drop the surge price too quickly - they want downward movement to be sticky - because you don’t want to tell drivers “there’s more money to be made over here” just to renege on that promise before the supply can even get there.

So if surge is sticky on the way down, these drivers may have found a way to exploit the pricing algorithm - simulate a price shock then reap the rewards. If surge were not sticky on the way down, this strategy might be much less effective - a few drivers would get better fares, but the market would return to equilibrium faster.

None of this is to say that you can’t have cartel behavior in a “bid-ask”-style market too, but I suspect this is a “hack” of Uber’s pricing UX as much as anything else.

ikeboy• 7 years ago

They can just counteract this by refusing to turn on surge pricing if they detect a large number of drivers disappearing if they predict that they'll come back shortly. Should be easy to predict that pattern and counteract it, unless the drivers are willing to skip work for an extended period of time.

freeflight• 7 years ago

But why should they?

Both Uber and Lyft also profit from this because in the end it's the customers who pay the difference.

So I don't really see either of these companies wasting time and effort on fixing this "problem".

sharadov• 7 years ago

Human dis-ingenuity has to be admired, beautiful!

traeregan• 7 years ago

https://callaride.com is launching next month (local to the Tampa Bay, FL area only for now), and one of their key differentiators is giving drivers the ability to set their rate. There will be minimums and maximums in-place, but they will have more control than with Uber or Lyft.

Note: I am a third-party PM working with the web and mobile application teams.

40acres• 7 years ago

Don't Uber and Lyft lose on every ride? I wonder if the increased fair caused by this cooperation makes the average ride profitable. Perhaps the price of a ride is more elastic than Uber and Lyft think? Especially at airports.

diydsp• 7 years ago

Why does everyone assume the workers are screwing Uber/Lyft?

Uber/Lyft make more money this way. The passengers are getting screwed.

chrischen2• 7 years ago

I think many people are missing some facts from the article. They aren’t so much going on “strike” as they are just turning off their apps on masse 5 minutes before plane lands to trigger surge pricing, and then turning back on to catch the passengers at surge pricing. Obviously customers are still choosing to accept such fares, but may not know that the real price (if they wait a bit) would be much lower.

smadge• 7 years ago

“Over 75% drive less than 10 hours a week to supplement existing jobs. On average, Lyft drivers earn over $20 per hour.”

These statistics could be very misleading. For example let’s say one driver works 4 hours, another 6 hours, another 10 hours with all three making making $25/hr and the final one works 80 hours making $10/hour. In this scenario 75% of drivers are driving 10 or less hours a week and the mean driver hourly rate is over $20. However 80% of the hours driven are by one driver making $10/hour. This one driver is clearly the workhorse of the ride-sharing company making the bulk of the profit.

sfifs• 7 years ago

I've seen something like this predictably happen with Grab in my office area in Singapore. At 5 you suddenly can't get cabs. You can at 4:55.

asdffdsa• 7 years ago

Ahh, the qualities of competitive markets. If theres antitrust laws, there should be similar policies from the workers' side as well.

colejohnson662• 7 years ago

So we should go after strikers because they’re depriving their employer of money?

Uber, Lyft drivers manipulate fares at DCA causing artificial price surges

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