Uber CEO Travis Kalanick
As an armed gunman took customers at a Sydney coffee shop hostage, Uber quadrupled prices for Australians fleeing the area, and setting a minimum ride fare of $100 Australian dollars (about $80 in the United States). And though within an hour, the San Francisco-based company backtracked, providing free rides, at this point a catastrophically bad response to a crisis is to Uber what is three yards a cloud of dust is to Ohio State: The only play in the playbook.
So how many hits like this can the fast-growing company absorb? Where’s the tipping point at which consumers will start to turn away from the ride-sharing service?
It’s not the first time that Uber’s surge pricing system has caused the company PR headaches. Last summer, it came under criticism for doubling prices during Hurricane Sandy. After New York Attorney General Eric Schneiderman went after the company under a 1979 law on price-gouging passed during a heating oil crisis on the East Coast, Uber agreed to limit what it charges during emergency situations. But the invocation of the price cap is up to Uber—and in any case, the agreement only applies to the United States, not to countries like Australia.
Uber quickly changed courts, offering free rides to residents fleeing the area and refunding fares. In a post, the company said, "Uber Sydney will be providing free rides out of the CBD to help Sydneysiders get home safely.” Uber has defended its surge-pricing plan as a way to encourage more drivers to provide supply during times of increase demand. In a blog post, it said, “surge pricing is used to encourage more drivers to come online and pick up passengers from the area.”
That’s the funny thing about surge pricing, which is set automatically by the company’s internal algorithms: It’s an entirely rational, and even reasonable, high-tech version of what every price has done since the first caveman traded two blocks of wood for one sheep: Change based on supply and demand. It’s hard to find something deeply objectionable about the mechanism in and of itself. But Good Lord does the company make it hard to admit that point. As Wired pointed out, “even though Uber didn’t intentionally do anything sinister, the company’s public image has grown so tainted in recent weeks and months, that the public actually believes it’s capable of doing something like this. And that’s an issue that’s much tougher to fix.”
The events in Sydney are just one of many PR end policy setbacks that Uber has faced in the last month. Last week, and Uber driver was arrested in India on allegations that he had raped a customer—and city regulators in New Delhi claimed to not have known that the service was operating in the India capital. In unrelated news, the French government announced that it would be banning Uber’s low-cost service starting next year after taxi drivers blocked roads in protest of what they called unfair business practices. Uber also faced a wave of bad publicity last month over claims that one of its executives had suggested hiring a opposition research team to attack the credibility of PandoDaily’s Sarah Lacy, an outspoken critic of the company. Uber CEO Travis Kalanick later apologized, but the company also faced questions of the privacy of rider data. In California, Uber faces lawsuits from San Francisco City Attorney Dennis Herrera in conjunction with his counterpart in Los Angeles over concerns about the company’s allegedly insufficient background checks on drivers.
Over the weekend, the Washington Post ran a deep dive into Uber’s collision course with state and local policymakers in the United States, arguing that “Uber’s approach is brash and, so far, highly effective: It launches in local markets regardless of existing laws or regulations. It aims to build a large customer base as quickly as possible. When challenged, Uber rallies its users to pressure government officials, while unleashing its well-connected lobbyists to influence lawmakers.” As the Post noted, the company has relied on a well-funded corps of lobbyists—at least 161 in 50 cities and states—to fight back against regulations backed by the taxi industry and insurance companies—in the process splitting traditional party coalitions, with tech-friendly Democrats squaring off against more union-oriented ones, with Republicans like Kentucky senator Rand Paul using their support of the company to try to attract younger voters.
As CityLab notes, Uber’s strategy, while leading to great success in its competition with the taxi industry, has led to public safety concerns: “ local regulations do more than write the rules for supply and demand; they're also there to protect the public interest, and it's in this area where Uber has been equally disruptive, in a negative way.” Which is all another way of saying, Uber sure looks bad, but if consumers aren’t demanding change, it will be up to the regulators.