Why Uber pushed back so hard on these findings
The Inconvenient Truths Uber’s CEO doesn’t want you to know
by Len Sherman
–Reprinted with Permission–
Part 3
This may explain why Uber pushed back so hard on the findings in my December 2023 forbes.com article, and reflective of a broader pattern of non-transparency about its US ridesharing operations.
- Carefully crafting what data the company is willing to disclose in its largest country market, making it difficult to assess even the most basic measures of Uber’s operations and financial performance (e.g. number of trips, price and driver pay trends, rider wait times, and driver utilization and acceptance rates).
- …Except for selective talking points that the CEO shares in podcast appearances and quarterly earnings calls, designed to show the company in the best possible light (e.g. US average driver earnings of $33 per active hour, reported US take rates of 15%).
- Changing the definitions of commonly used metrics, most notably take rates, which Uber now calculates only after excluding opaque commercial insurance expenses and booking fees.
- Threatening to suspend operations in cities proposing to require additional information disclosure.
- Repeatedly dismissing the validity of independent studies of company operations that of necessity must rely on third-party data sources, but without providing specific counter-factual evidence.
- Actively blocking third-party apps from offering consumers and drivers valued information on competitive ridehail prices and pay rates, thwarting attempts to help level the playing field against Uber’s asymmetric information advantages.
Anti-Competitive Terms Of Service
The last point warrants the attention of government regulators concerned with preventing dominant market leaders from exercising anti-competitive market power. Let’s start by examining how Uber has sought to limit consumer access to information on competitive pricing in the ridehail sector.
Consumers have always complained about Uber’s surge pricing practices, and that concern has only grown in recent years. When Uber first started, the company was open and transparent about the rationale for its pricing policies, setting fares at a base level determined by published per-mile and per-minute rates in each city, possibly adjusted by a surge multiple (e.g. 1.5x), reflecting temporary supply-demand imbalances. Consumers and drivers were explicitly shown applicable surge multipliers on Uber’s app on each trip offer.
Uber’s stated policy was to use surge pricing to dynamically balance supply and demand, returning fares to normal base levels as quickly and often as possible. Consumers may not have liked the impacts of temporary price spikes, but at least Uber’s rationale and marketplace logic were clear and sound.
Starting in 2016 however, Uber shifted to an “upfront pricing” policy whereby consumers ordering a ride were simply presented a price, determined by an opaque algorithm, dropping any reference to base fares or surge multiples. Uber’s pricing policies thus became less transparent, often varying widely from trip to trip, contributing to an erosion of consumer trust.
A survey of over 1,700 rideshare consumers conducted in May, 2024 by Obi, a rideshare data services company, found that the high price of rides is the number one reason consumers don’t use rideshare more, and 48% say it’s their biggest frustration. Ride fare transparency also ranked highly, showing a clear appetite by consumers for more transparency on how much drivers earn, vs ride providers and taxes.
Consumers who take the trouble to compare prices between Uber, Lyft and other ridehail providers often find a significant difference. For example, in a research project I conducted in 2019 comparing 10,000 identical trips (precisely the same origin, destination, and time of day) in the four largest US rideshare markets, Uber and Lyft’s prices differed by more than 16% on over half the trips, and by more than 25% on one-third of the trips.
Obi, a startup launched in 2017, recognized the need and opportunity to provide a price comparison tool to rideshare customers, comparable to how Expedia and Google Flights operate in the airline sector. Consumers who are willing to share their rideshare login credentials with Obi get free, real-time price and travel time comparisons from competing rideshare services.
Obi’s app opens by asking users, “where do you want to go?” After entering a destination address, Obi immediately returns the prices and travel times for competing services, ranked from best to worst. In this example, for a rideshare trip I recently requested in New York, there was a considerable price difference between competing services.
As the dominant US rideshare provider, with three times the market share of its closest rival, Uber opposes apps providing price transparency to consumers. In fact, Uber has been threatening Obi’s subscribers with deactivation from Uber’s app as noted in an email I recently received from Uber shortly after using Obi’s price comparison tool.
While Uber’s Terms of Use do prohibit users from sharing login credentials with third parties, Obi does not share personalized trip request information with other companies or organizations, encrypts transaction data in transit, and allows users to request their data to be deleted from Obi’s servers.
As a point of contrast from Obi’s experience, Southwest Airlines, the largest US domestic air carrier, which had previously blocked price comparison apps from listing its flights, now allows Google Flights to list its flights alongside competing airlines.
My experience (along with thousands of other Obi users who have received similar deactivation warnings from Uber) warrants regulatory review. The question is, should a market leader like Uber be allowed to establish terms of use under the guise of “security” that may be as harmful to consumers and competitors as they are helpful to the market leader?
For example, Amazon has faced legal scrutiny over a “Most Favored Nation” clause in its vendor terms that dictates how much retailers can charge for their products on other platforms, harming competitors and raising consumer prices. And Apple has faced regulatory scrutiny over its app store terms of service that sharply constrain competing app developers’ business operations, payment service choice, and profitability, while raising consumer prices.
Uber has also flexed its market power to restrict third-party apps from providing valued information to rideshare and delivery drivers. To understand the marketplace need for driver support services, consider the stressful working conditions that drivers face on the job.
In most cities, for each trip offered on Uber’s app, drivers are shown the rider’s destination, pay amount, and the predicted trip time and distance, including to the pickup point. So far so good. But drivers have only seconds to respond, with the fear that if they refuse too many offers, Uber’s AI algorithms will put them in a “penalty box” of unknown duration, ghosted from receiving additional offers or, as Uber is now piloting in three states, receiving even worse offers going forward. As previously noted, multiple drivers are also often offered the same trip in real-time “Trip Radar” auctions, pitting Uber drivers against each other.
While juggling these split-second decisions on which trips to accept, drivers are also expected to drive safely, and to provide professional, courteous customer service, even when dealing with passengers who often cancel trips, aren’t ready for pickup, or who may be drunk, underage, abusive, or not who the app claims them to be.
And woe betide drivers who receive a low rating or complaint from a passenger, for legitimate reasons or otherwise (e.g., asking a passenger not to vape in their vehicle or having a child seat available for their toddler). A recent survey of over 800 Uber and Lyft drivers in California found that two-thirds have been deactivated at least once, and one-third never received an explanation of the reason for their dismissal.
To help drivers operate more safely and profitably, several third-party apps (e.g., Maxymo, Para, GigU and others) have emerged, offering valuable features and functions. As independent contractors, drivers value decision-support help to effectively control the types of trips they accept. To see how these apps work, consider the information a driver sees on Uber’s driver app when a trip offer comes in.
Next: The View from the Driver’s Seat
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Len Sherman is the Executive in Residence and Adjunct Professor at Columbia Business School. He previously served as Senior Partner at Accenture’s products industries group and a General Partner in its corporate venture capital group. He has been a board member for five business startups.
