Tuesday, April 12, 2022


Introduction ...

The world of business survives on a simple concept of supply and demand in that the charge for supply can vary based on how many people want that supply.  However, this is regulated to stop price gouging, greed, extortion, fraud, misrepresentation and like unlawful actions by specific verbal or written contractual obligations on concluded agreements protecting the so-called weaker party.  Not all is fair in business.

In simple terms, both parties must agree to any transaction for it to be legal otherwise anyone could bill anyone and expect payment with no recourse.

A seller has little obligation to supply at a price other than when advertised at a certain price which leaves a vast grey area when the price is advertised as a variable based on demand.  

Enter ‘surge’ pricing from UBER.  UBER says that their surge pricing is designed to get more drivers into areas of high demand thereby supporting those wanting to travel.  On a prima facie test this would seem logical in that drivers would flock to ‘surge priced’ demand locations thereby increasing their revenue and basic supply.  But this would also reduce supply from other areas as demand goes unmet resulting in those areas also suffering surge pricing because demand exceeded supply and Uber’s algorithm kicked in.  A vicious circle not benefiting customers in any way shape or form but hugely benefitting Uber and their drivers.  Surge pricing just follows demand.  Uber obviously target demand areas and automatically add surge pricing which creates further areas of demand because supply has left to chase the first area.  A ‘self inflating’ cycle.

Imagine if this surge concept applied to the average supermarket ... “Sorry Madam but your bill was for $23 but because there was a queue of 4 people waiting to pay there will be a surge charge of 4 leaving you a bill of $92 but as we already have your credit card on file it was automatically deducted.  Have a nice day”... If Madam had accepted this surge in full and absolute knowledge before the event then she was accepting paying $92 for a $23 bill.  But if the surge is not known or accepted before the event then it’s unlawful. 

However, law surrounding extortion, fraud, blackmail, price gouging, deception and misrepresentation can mitigate Madam’s problem.  Is it extortion to charge 4 times a normal price when demand is high or is it just normal business practice?  I suspect the latter albeit we all have a choice not to shop at that supermarket or ride with Uber as companies extorting clients [extortion - a demand without a reasonable cause with an intent to gain a benefit]. There is a difference between demand pricing and fee gouging and a huge difference to charging after the fact without consent.


Case study ...

In our case, we accepted a confirmed charge of $115.32 as a concluded agreement by phone app despite Uber’s surge pricing of 3.9 because we had little choice.  Uber’s algorithm had calculated the fare based on known traffic conditions.  Pay 4 times the fare or walk!

What we didn’t expect was a further loading of 50% with a charge of $57.55 deducted from the credit card without our knowledge or consent.  We had not accepted this further charge.

This final fee was a clear misrepresentation of our already concluded agreement.  It was and is tantamount to fraud.  Intentional theft of funds without consent.

Conclusion ...

Before travelling with Uber make sure you know what is being charged and make sure it is accepted as a concluded agreement and don’t accept ‘after the fact’ charges.  Better, support normal taxi drivers.

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