New study suggests Uber overcharges passengers
Analysis of New York trips shows Uber has advantage with upfront pricing
A new study has revealed a gap between the fare that Uber charges passengers and the metered fare that it reports to drivers, raising questions over whether the transportation company is profiting from the difference.
It appears that Uber may be systematically overcharging passengers in New York compared to the driver’s metered fare, according to data from 165 trips compiled by Harry Campbell, founder of The Rideshare Guy consultancy.
The finding is set to further erode trust between Uber and the driver community, after a series of incidents, including a video of chief executive Travis Kalanick yelling at an Uber driver, had already damaged driver ties.
Last year, Uber introduced a new pricing system, where it guarantees an upfront price to passengers before they start their trip. However, drivers are paid a metered fare based on actual miles and minutes, and cannot see the passengers’ fare.
A spokesman for Uber declined to disclose what the company’s data showed about the fare discrepancy, and whether Uber was profiting from the difference. “There are times when the rider fare is higher or lower than what a driver earns,” the spokesman said.
“We know we need to do a better job of making earnings clearer and simpler so what a driver makes doesn’t feel like a mystery.” Uber planned to update its driver app in coming weeks to make earnings clearer, the spokesman added.
However, the new study, which is the first of its kind, finds that on average the fare discrepancy works out in Uber’s favour, particularly for rides that are very long, and for rides on its basic UberX service.
“The problem with this system is that it is ripe for abuse,” says Mr Campbell, who also drives for Uber himself. “Uber doesn’t have the greatest record with transparency and they are essentially saying ‘Trust us, we promise not to take advantage of this system.’”
Over the course of 82 UberX rides in New York, Uber made an additional $163 thanks to the discrepancy between the fares, the study found.
However this formula was reversed for carpool rides, where Uber bore the brunt of the discrepancy and lost $108 over 49 rides.
In total, Uber netted an additional $86 over the course of the 165 rides in the study, which drew data from two drivers whose rides covered six different types of Uber services (such as UberBlack and UberXL).
“It's hard to say they underpaid the driver, since the driver received the exact right amount based off mileage and time, but they obviously overcharged the passenger,” says Mr Campbell. The most egregious example from the study was a long ride where Uber overcharged the passenger by $25, on a total fare of $143.
While Uber does not tell drivers the passenger’s upfront fare, the study used sales tax charges levied by New York state to back-calculate the passenger fares for each ride.
The company has been embroiled in controversy before over driver payments and questions of transparency. Earlier this year, Uber paid $20m to settle a Federal Trade Commission lawsuit that alleged the company had misled drivers about how much they could make driving for Uber. Uber did not admit wrongdoing as part of the settlement.
Separately, in March, Uber paid hundreds of thousands of dollars in refunds to Philadelphia limousine drivers, after it did not pass through a service fee.