Uber is well known for using a dynamic model it calls surge pricing that adjusts the cost of a fare based on supply and demand. The company's CEO, Travis Kalanick, has defended this practice, saying it puts more cars on the road, despite public outcry from customers, media, and politicians. But the company drew particular heat when surge pricing kicked in during extreme weather in New York City, specifically during Hurricane Sandy and a recent snowstorm. At the time the NY attorney general Eric Schneiderman released a statement implying that Uber's surge pricing during these periods could constitute price gouging.
Today the company announced that it reached an agreement with the NY attorney general's office to cap surge pricing during emergencies, a move Schneiderman called, "a thoughtful application of NY law to new #tech." A press release from Schneiderman's office also stated that Uber plans to implement this new policy not just in NY, but on a national level.
"This policy intends to strike the careful balance between the goal of transportation availability with community expectations of affordability during disasters," said Uber CEO Travis Kalanick. "Our collaborative solution with Attorney General Schneiderman is a model for technology companies and regulators in local, state and federal government." Uber says it will also be donating its cut of surge fares that take place during emergencies, 20 percent of each total fare, to the American Red Cross.
In the past, Uber's critics had used the surge pricing during severe weather to openly attack the company. "Uber has openly stated its intention to destroy taxi operations in cities across the country. Imagine, for a moment, that Uber is successful. Each time there’s an emergency, a snowstorm, or just heavy traffic, passengers would be forced to pay outrageous fares or be shut out of getting a ride," said Robert Werth, president of the Taxicab, Limousine & Paratransit Association, an opponent of Uber that has fought against its entry into the New York market. "It puts those without high disposable income at incredible risk, and destroys the quality of life and transportation assurances that taxicabs provide. Uber doesn’t want to serve the full community. It wants to line its pockets with profiteering."
Uber has been moving very aggressively to undercut traditional taxi cabs in big cities like New York and San Francisco. With this new agreement in place, its critics from the incumbent industry will have to find new ways to attack the fast growing service.