07/03/2024 | Press release | Distributed by Public on 07/03/2024 10:13
WASHINGTON, D.C. - Today, U.S. Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, called for transparency from Uber and Lyft on its use of surge pricing to set fares. In a letter to the CEOs of Uber and Lyft, Brown expressed concern that frequent and opaque price changes and diminishing competition are making ride-hailing services less affordable, and that pricing algorithms enable corporations to charge higher prices in circumstances where consumers have the greatest need and fewest choices.
"Using algorithms to set prices, including dynamic pricing, abuses consumer data and suppresses competition, making prices unpredictable and taking away people's ability to find the lowest price," Brown wrote. "Under these shifting conditions, fare rates are highly volatile, making it difficult for consumers to predict how much they will pay for a given ride."
A copy of the letter sent to Lyft appears here and a copy of the letter sent to Uber appears here and below.
Dear Mr. Khosrowshahi:
Second only to housing, transportation costs are Americans' biggest necessary expense. Transportation-related companies' increasing use of dynamic pricing, or "surge pricing," threatens to drive prices even higher. Using algorithms to set prices, including dynamic pricing, abuses consumer data and suppresses competition, making prices unpredictable and taking away people's ability to find the lowest price. Such pricing maximizes profits at the expense of consumers, without improving or changing the service offered. While Uber was an early adopter of dynamic pricing and has long used this technique to set fares based on consumer demand, this practice is now spreading to more industries. I want to learn more about the relationship between Uber's use of algorithmic pricing to set fares and growing transportation costs.
According to your company's website, Uber's dynamic pricing algorithm "adjusts rates based on a number of variables, such as time and distance of your route, traffic and the current rider-to-driver demand." Under these shifting conditions, fare rates are highly volatile, making it difficult for consumers to predict how much they will pay for a given ride. While proponents of dynamic pricing often claim that dynamic pricing lowers costs by creating more efficient markets, your company's rising prices cast doubt upon that assertion. Between 2018 and 2022, Uber's prices increased by 83 percent.
Historically, Uber has denied claims that it uses consumers' private data to set fares; however, in 2016, the head of economic research at Uber, Keith Chen, stated that one of the strongest predictors of customers' willingness to pay for increased fares was the amount of battery left on a device. More recent research has shown that Uber's prices increase when a device has low battery - suggesting that Uber preys upon the perceived desperation of their customers. Instead of enabling consumers to make informed decisions, aggressive companies - like Uber - exploit technology and consumer data to manipulate consumers, extracting every last cent possible from them.
Frequent and opaque price changes and diminishing competition are making ride-hailing services less affordable. I am concerned that pricing algorithms enable corporations to charge higher prices in circumstances where consumers have the greatest need and fewest choices. To better understand how corporations like Uber use technology to increase prices, the public needs clarity on how Uber deploys pricing algorithms and uses consumer data, and on how these algorithms are affecting American consumers' wallets. Please provide answers to the following questions by August 1, 2024.
Thank you for your consideration and your timely response.
Sincerely,
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