Uber Agrees to Cap Surge Pricing During Emergencies. That Sucks for Customers and Drivers.

This afternoon, New York
Attorney General Eric T. Schneiderman announced that the
ridesharing app Uber has agreed
to cap its prices during emergencies in order to comply with the
state’s price gouging laws.

Schneiderman seems pretty pleased with himself, and he’s even
got a quote from a highly domesticated version of bad-boy Uber CEO
Travis Kalanick as a trophy in his press release. But Uber’s
customers and drivers should be pretty pissed off.

Right now, Uber uses dynamic pricing to encourage drivers to
come out when demand is high or conditions are unappealing. The app
warns users that they will be paying higher prices and lets them
estimate the cost of their ride before clicking the button to
summon a car. But that kind of disclosure isn’t enough for New
York’s regulators.

According to
the press release:

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.”

What this means for New Yorkers: Assuming Uber doesn’t have a
behind-the-scenes plan to bump driver pay in times of crisis, fewer
drivers are going to heroically schlep out to the far reaches of
Brooklyn when it’s snowy or subway strike-y. That means customers
who would be willing to pay still can’t get a ride and drivers who
would be willing to work will stay at home instead.

Uber CEO and co-founder Travis Kalanick said this, hinting at
broader implementation nationwide:

“This policy intends to strike the careful balance between the
goal of transportation availability with community expectations of
affordability during disasters. Our collaborative solution with
Attorney General Schneiderman is a model for technology companies
and regulators in local, state and federal government.”

Aw. So warm and fuzzy. To be fair, Kalanick was probably trying
to forestall a worse deal for his company and his customers in this
negotiation.

But just as a reminder, here’s Kalanick
on regulators in 2012:

“Every city we go to eventually the regulators will make
something up to keep us from rolling out or continuing our
business,” he told an audience at TC Disrupt in San
Francisco….

Kalanick…waxed philosophical about what it is that drives
regulators in his industry specifically. “I have been trying
to understand the regulators,” he said, and he’d decided that they
work on three levels — none too good.

“One is cronyism,” he said. “They get a Stockholm Syndrome with
the folks they regulate… One even told me that they view themselves
as customer support for the taxi and livery companies.”

Number two: “If they don’t have rules they feel it is illegal,”
he said. This is the knee-jerk, err-on-the-side-of-caution approach
that Uber has currently been fighting.

Number three will sound familiar to anyone who has covered
regulation in many other areas, like technology: “They are
incredibly sensitive to what’s the public view, the optics rather
than the reality,” Kalanick said.