Here’s Why Uber Sometimes Pockets Extra Money From Rides
Uber pitched “upfront pricing” as a way to add transparency to its service by telling passengers how much their ride would cost before they ordered it. But the change has led to accusations that the company is secretly taking advantage of passengers and drivers.
Since the upfront pricing program kicked off in June, some Uber drivers have said that their passengers have been overcharged for rides, according to The Rideshare Guy, a blog focused on driver jobs. Meanwhile, those drivers also complain that they are being shortchanged by the new policy.
Their complaints raise questions about how Uber compensates its drivers, many of whom are already reeling from a reduction in pay following a fare cut in January across dozens of U.S. cities that is supposed to spur more demand for rides.
One Los Angeles driver told The Rideshare Guy blog that he made only $9.31 on a 10-mile ride that was supposed to cost his passenger $18.08 (Uber typically takes only a 25% commission). Another driver in Colorado complained that he earned only $15.13 on a ride that cost his passenger $44.31.
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The questions started after Uber introduced upfront pricing, which the company says takes the guesswork out how much rides cost. Under the old model, Uber’s app would tell passengers that surge pricing was in effect and by how much—1.6 times the base price, for example—so they could decide whether to proceed. Now, the app immediately tells passengers exactly how much their rides will cost.
What happens in some cases is that Uber’s automated system overestimates the length or duration of a ride, according to a company spokesman. When this happens, passengers still pay the upfront price that they were initially quoted rather than a lower price based on the actual details of the trip. Uber simply pockets the extra money. Passengers never know the difference.
Drivers, however, end up earning less because they are paid based on the number of miles driven (plus the base fare). Drivers who take shorter routes—either because of a short cut or a more efficient path—are paid a lesser amount even though the passenger’s fare is unchanged.
Does it sound like passengers are overcharged in such cases? Perhaps.
Uber, of course, argues that passengers agree to the fare upfront and therefore do not deserve a lower price. By the same token, Uber insists that drivers agree to its pay policy when they sign up and that the company therefore doesn’t owe those drivers a cut of any extra fares it collects.
“With upfront fares, riders agree to a fare that’s calculated in advance while drivers get paid based on a per-mile, per-minute rate as is normal with uberX,” the spokesman told Fortune. “Because no predictive model is 100% perfect, what riders pay and drivers earn on a trip may differ slightly from time to time.”
The spokesman also added that it is more common for Uber’s system to underestimates a ride’s route, requiring the company to make up the difference between the price and the driver’s earnings from it own pocket. The spokesman couldn’t provide specific numbers showing the frequency of either case nor did Uber say how much extra money, if any, the upfront fare system brings in.
But Christian Perea of The Rideshare Guy blog did note that he decided to take a few test rides after hearing about the policy for shorter-than-anticipated rides and was overcharged on the first one he took, raising questions about Uber’s claim that it happens only rarely.