One time when I took an Uber, the driver told me how Uber was defrauding him. He had his friend order an Uber, and he made sure to pick him up, and they compared the prices. The prices, unsurprisingly, were much higher for the passenger than for the driver.
The difficulty of course is proving this to be true. And then the question is how much does Uber lose from a settlement? Probably less than they earned from price manipulation.
But at this point it seems people might actually think negatively of Uber as a whole, but how long that will stick is hard to say.
Uber's driver agreement isn't and has never been, "You get X% of the fare we charge." It's "You get $X for this fare." (Based on some combination of time and distance actuals, which are also transparent, along with any multipliers.)
If I can charge a rider $10 for a ride and get a driver to accept $5, no one's "defrauded". They may not like the spread, but that's easy to solve: riders, don't pay $10, and drivers, don't accept $5 in the first place.
Uber drivers don't get to accept or reject rides based on destination or cost. All they know is the pickup location of the passenger.
You really have to go through a lot of contortions to defend Uber on this one. Remember when Best Buy created an entire shadow web site just to keep people from looking up prices in the store? Maybe not illegal, but not a great business practice.
> Remember when Best Buy created an entire shadow web site just to keep people from looking up prices in the store?
No, because they never did that. The explanations that came out ten years ago made sense, about different regions having different pricing structures and the national price not always matching in-store. One spends different amounts to retail items in different areas of the world. That was a Consumerist/Gizmodo/Connecticut hullabaloo over nothing, which continues to this day at pretty much every retailer I can think of. I can totally understand an in-store kiosk showing in-store prices, and there are more non-nefarious explanations for the entire scenario than nefarious. I say that disliking Best Buy.
Take gasoline, for example. Notice it's cheaper when you cross an arbitrary governmental border? California into Nevada is my favorite. Notice Chipotle, hell, Taco Bell is cheaper (sometimes >20%) in some places than others? It's all the same issue.
I was unclear. When I say $X I don't mean a flat amount per fare. (You are correct in that regard.) I mean an agreed upon payment formula of $y * miles + $z * miles = $X. That formula is not secret. And does not contain $fare as a variable.
Why? spcelzrd talked about how uber drivers don't get too choose on each specific ride, and that's true. But that's besides the point: they are playing something like an iterated prisoners' dilemma with uber; but they are free to take their business elsewhere, if uber 'defects' too much.
v. In exchange for use of the Uber Software, drivers will be charged a service fee on a per transportation basis calculated as a percentage of the determined fare.
This is found under the allegations section of the lawsuit.
Good point! We'd have to dig into the user agreement itself to see what nuances exist there. Based on this complaint alone, I suspect Uber will argue "determined fare" may not mean "fare charged to rider" and that drivers are paid on the actual ("determined") miles and time.
Additionally, I find the allegation that Uber created upfront pricing for "the purposes of creating this discrepancy" to be very difficult to prove. Is this intended to highlight the difference between a breach of contract and "malicious fraud"?
By the way, here's an article from last summer on the same topic, quoting Uber as saying:
“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.”[1]
However, it is confusing, and Uber's own site makes no mention of upfront pricing and says:
"Drivers using the partner app are charged an Uber Fee as a percentage of each trip fare."
Those two statements are at odds with each other, and both are from official Uber sources.
This isn't a "spread." This is Uber charging the passenger one fare and paying the driver as if the passenger paid a smaller fare, without telling the driver or the rider that it is doing that. It's more like a broker quoting two different spreads to either end of a transaction and skimming off the top.
If the variables are the same to calculate both prices, then it's Uber's cut which is variable.
Doesn't sound like a fraud to me, but let's take for example payment: wasn't Stripe main success driver the simple (and predictable) pricing rule[1]. How long before Lyft or some other company steals drivers from Uber this way?
More than that: they're different vatiables. One is actual, measured time and distance: this is how drivers are paid. The other is estimated time and distance wrapped up in a risk modeling / worst-case analysis: this is how riders are charged.
Estimation vs. measurement. The two converge in an ideal world where risk drops to zero and estimation methodologies are perfect.
I don't really understand why Uber would be required to show the same price to both sides unless contractually obligated. When I hire a contractor to renovate my house he doesn't typically show me the invoices to all his subs. He negotiates one price with them and a different price with me.
According to the complaint, this was part of the contract:
52. The Uber Defendants and Plaintiff and the other Class Members had a
contractual agreement regarding the collection, receipt, and payment to drivers of the
fares paid by Users for the driver’s transportation services.
53. The Uber Defendants agreed that they would collect and pay to the
Plaintiff the fare by the User, minus a contractual service fee and booking fee.
54. As a result of the misrepresentations and omissions alleged herein,
including the Uber Defendants' failure to remit payment to the Plaintiff and other Class
members of the full amount of the fare (after deducting the contractual service fee
percentage and booking fee), there has been a violation or breach of the agreement
between Plaintiff and the Uber Defendants. Accordingly, Plaintiff and the other Class
members have been underpaid for their services and did not receive the benefit of
their bargain.
If the contract with drivers did, in fact, say that Uber would pay out the fare that the user paid minus a standard service and booking fee, then it seems like this is pretty solid, though IANAL. I have no idea if that's what the actual agreement is, though.
I don't know what any contracts say, or may have said in the past, but the Uber website makes it clear that drivers are paid a pretty fixed rate based on time and distance. I'm sure there's some extra details around the high demand times and all that, but there's no mention of getting paid a fixed %.
Perhaps the contract changed at some point, and Uber decided it didn't need to honor the prior contracts (or was negligent in taking them into account)?
Edit: Not to imply the accusations are valid. I'm not trying to make a case that Uber must be guilty, as much as my wording could be read that way depending on how you approach it.
If the driver's payment is supposed to be based on the fare and Uber is misrepresenting the amount of the fare collected from the passenger, that's a problem.
Of course it's marketing. The website is obviously not a legally binding contract. The point is that it's not in any way described as being an fixed percentage of what the passenger pays. That's just not the payment mechanism at all. Of course, the devil is in the details, but it would really surprise me if Uber's contract had a completely different compensation model than the website.
When I'm asked to provide a quote for service, I estimate the amount of time it will take me, and send the customer a quote based on this. But I don't tell the customer that they are paying me by the hour -- I say this is what I am charging you for me to do X.
If I estimate 40 hours but it takes 37, the customer still pays for 40. If it takes 43 hours, the customer still pays 40.
I believe this is how a good portion of contract work works.
That doesn't seem to be quite the whole story, though.
Suppose I'm a contractor you've hired to remodel your house. I tell you that I can get a plumber to do it for $5,000, of which I'll get some cut, and you agree. Then I go to a plumber and tell them you're willing to pay $4,500 for the job, and they agree. I pocket the extra $500.
No I think you've got it wrong. Drivers are paid by miles and minutes after the trip is done. It's like "I'm a contractor you've hired to remodel your house. I tell you that I can get a plumber to do it for $5,000, of which I'll get some cut, and you agree. Then I go to a plumber and ask them to do the work, of which I'll pay them $50/hour. If the actual work take them more than 100 hours (>$5000). Then I'll pay the difference. If the actual work take less than 100 hours then I pocket the difference." Have I been honest in this scenario?
It's very similar to that Jobs and Wozniak story, about how Jobs scored a contract and split it with Wozniak, and much later found out that the contract was actually for a way higher price and Jobs pocketed almost all of it.
Weird to see "hacker" news full of people defending Jobs/Uber, but I guess it is what it is.
These aren't just estimates, they are minimum bills that are purported to be based on "time and distance of the route"[1] and if they systematically and intentionally padding time and distance that sounds an awful lot like fraud. IANAL and it may not be technical fraud but it is at best a deceptive business practice and again one of the reasons we have taxi regulators.
Uber drivers get paid based on time and mileage. What the passenger pays is irrelevant. So the only thing that would matter is if the driver's tachometer and clock don't match up with Uber's.
My understanding, based on other comments here, is that Uber recently changed its pricing model so that riders get a fixed price, but drivers still get a range based on distance and time. Obviously the rider's fixed price needs to have some cushion in it. It's a change, and recruiting material may need to be changed if it wasn't already, but it's hardly a scandal. Also, the % could remain the same if Uber is still paying that % in aggregate.
So often I hear people who really think that companies are milking them, in reality the company is asking a fair price based on wage and company expenses. (of course some companies do really overcharge)
The difficulty of course is proving this to be true. And then the question is how much does Uber lose from a settlement? Probably less than they earned from price manipulation.
But at this point it seems people might actually think negatively of Uber as a whole, but how long that will stick is hard to say.