PORTLAND, Ore. – Uber is accused of cashing in on a new pricing model that has been up and running in Portland since September.
The ride-hailing service has been operating in Portland for a little over two years. The San Francisco-based company’s reach is global, but its financials are less solidified – it lost $2.8 billion last year.
Last fall, Uber launched a new “upfront pricing” model in Portland and other cities, where it sometimes charges riders more while paying drivers less. Uber told Bloomberg the pricing model will help the company increase revenue.
A class-action lawsuit filed Wednesday accused Uber of skimming more than $7 million from New York City passengers every month through upfront pricing, according to an NBC News report. Drivers in California also filed a lawsuit over the pricing model.
Uber said it won't comment on pending litigation.
How it works, according to the lawsuits, is that Uber will estimate more for a ride, based on a longer travel distance. If the driver takes a more direct route that would cost less, Uber still charges the passenger the higher price.
The drivers don’t see a bump in pay, though. Instead, Uber pockets the difference.
“With Uber’s upfront pricing, the passengers still get charged for the longer trip,” said Portland Uber driver William Ensign.
In an explanation sent to drivers in its new terms of service, Uber said the upfront pricing helps them “keep your rates consistent, while offering new ride options like subscriptions.”
An Uber spokesman said the upfront pricing model also means some customers could pay less, if a driver hits traffic or has to take a different route.
“The numbers I’ve seen are that we are underestimating more than we’re overestimating,” said Uber spokesman Nathan Hambley.
He provided KGW with three specific examples of Uber undercharging Portland riders between December and May.
Two happened during historic snowstorms. One ride that happened during the Dec. 14 snowstorm charged a rider $5 for a $208 trip from the Pearl District to Southwest Portland. The $5 fee was part of a limited-time promotion.
The second was Jan. 10, when Portland received a foot of snow. A rider paid $21.04 for an $85 ride.
The third was May 6, when a rider paid $98 for a $140 ride from Portland to West Linn.
Hambley said he could not share Uber’s complete upfront pricing breakdown for Portland, because it is internal data. He said Uber’s goal for upfront pricing is to get the estimate correct.
Uber says the new model offers riders a set price without any sticker shock at the end of a ride, and eliminates incentives for drivers to take a longer route.
The company maintains that driver pay hasn’t changed.
“Drivers earn based on the work they perform, regardless of what a rider pays,” said Bryce Bennett, general manager for Uber in Oregon.
The shift prompted Ensign, who has given 2,500 rides through Uber, to quit. Drivers on several online message boards expressed similar sentiments.
But one Portland driver, Ilene Brown, said she is fine with the policy.
“I think there is a two-way street there,” Brown said. “With some drives, the price is going to be different than what you’re quoted because of traffic or construction.”
The news comes on the heels of a scandal involving Uber’s “Greyball” tool, which allegedly helped the company avoid code enforcers while operating illegally in Portland.
The city of Portland is investigating Uber for its use of Greyball.
Uber has also been accused of charging riders what it thinks they can afford in cities with UberPOOL. Hambley says some riders will pay more than others in those cities, but that’s based on popular routes.
Uber said it hasn’t seen a drop in drivers recently.
“We're actually up slightly in terms of active drivers and trips in Portland,” Bennett said.
But Ensign said he’s sticking with Lyft from now on.
“This is a matter of Uber ripping off passengers and drivers,” he said.