10 votes

Uber, Lyft drivers manipulate fares at Reagan National by causing artificial price surges

2 comments

  1. Deimos
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    Matt Levine had some interesting thoughts about this story in his newsletter today:

    Matt Levine had some interesting thoughts about this story in his newsletter today:

    We have talked before about law professor Sanjukta Paul's discussion of “the firm exemption” in antitrust law, the fact that a business firm is a legal way to coordinate actions in a way that would be illegal for private individuals.

    Imagine if instead of a bunch of independent-contractor Uber drivers waiting at the airport, this was just a story about a bunch of drivers employed by Uber, charging prices set by Uber and getting paid a wage by Uber. If that was how Uber Technologies Inc. operated—if its drivers were employees—then Uber could set whatever prices it wanted. If its strategy was like “we will raise fares from the airport when a plane lands, and lower them again when there are no planes,” that would be a perfectly legal and sensible strategy; people would complain—people really don't like surge pricing—but it would basically be fine. It's a company, it can charge whatever prices it wants, as long as people are willing to pay.

    Similarly, if Uber's drivers felt that they were being underpaid—and they do; that's why they're turning the app off—then they could go to Uber and negotiate for higher wages. They could coordinate to do this, starting a union and bargaining collectively and maybe striking to put pressure on Uber. The result might be higher wages, paid for by higher prices to consumers, kind of like what is happening here.

    But that isn't quite what is happening here. Instead of Uber setting prices, telling its employees what to charge, and negotiating wages collectively with employees, there are just a bunch of independent businesses, linked only by the fact that they all use the same software app to market their services to riders, conspiring to push up consumer prices. They are openly discussing, with their independent-businessperson competitors, coordinating to raise prices for consumers—and using the app to implement their agreement. If they were all coworkers this would be legal, but they aren't, so it's, at least, troubling.

    It is somewhat strange how much turns on that distinction. People often talk about how important it is for Uber and Lyft that their drivers be classified as independent contractors rather than employees, because the companies don't want to have the legal obligations (minimum wages, overtime, health care) that businesses have to employees. (“Our business would be adversely affected if Drivers were classified as employees instead of independent contractors,” says a risk factor in Uber's initial public offering prospectus.) On the other hand if the drivers are just independent businesses, and if the app gives them a way to coordinate with their competitors to raise prices on consumers, isn't that … also a problem? “The Legal Argument That Could Destroy Uber,” is how Jalopnik described it, citing Paul's work, and I might not go that far, but Uber's setup does seem to raise some weird antitrust problems that would be avoided by just employing the drivers.

    3 votes
  2. Bullmaestro
    Link
    Sounds like they were trying to Lyft their profits.

    Sounds like they were trying to Lyft their profits.

    1 vote