It’s been a tough year for Uber, which has faced several lawsuits from customers, drivers and even the government.
From ripping off its drivers to confusing its riders with a new pricing system, Uber recently has landed its name in the news because of some questionable calculations.
How did Uber shortchange thousands of drivers?
Uber issued a statement on Tuesday admitting that they have been miscalculating the payment for tens of thousands of drivers. For the past 2 1/2 years, Uber has been calculating the company commission without deducting taxes and fees.
The New York Times explained the error in simple terms: If a passenger payed Uber $20, and $2 of that represented taxes, Uber’s commission was a percentage of the full $20, not of $18, as it should have been.
Rachel Holt, Uber’s general manager for the United States and Canada, issued a statement on the error.
“We are committed to paying every driver every penny they are owed — plus interest — as quickly as possible,” Holt said. “We are working hard to regain driver trust, and that means being transparent, sticking to our word and making the Uber experience better from end to end.”
Though seemingly small, Uber’s miscalculation forced drivers to cover a percentage of the company’s taxes. Uber said that each affected New York City driver would get a refund of about $900, including interest.
How does Uber even calculate ride fares?
Originally, Uber was basing its fares on mileage, time and geographic demand. Last year, however, Uber switched to a route-based pricing system, meaning they now charge riders based upon what they think customers will be willing to pay.
The route-based system gives customers a set price, rather than a meter-based estimate, and it uses machine-learning techniques to estimate how much a group of customers would be willing to pay for their ride.
As Quartz explains, this means that someone who is traveling from one wealthy neighborhood to another might be asked to pay more than a different person heading to a poorer part of town, even if demand, traffic and distance are the same.
This form of “price discrimination” isn’t inherently bad, as it can lessen the price for riders and expand the company’s customer base to include lower-income passengers.
So what’s the problem?
Uber has previously been accused of shortchanging drivers while overcharging riders, but this time it’s a little bit different. The main issue with the route-based system was that Uber didn’t tell their drivers that they switched to it.
In changing to a route-based pricing system, Uber separated the amount that the rider pays from the amount that drivers are being paid. Though riders are now given a set price for their trip, the sum that Uber pays to drivers is a metered rate based on time and distance.
Takeaway
Uber’s issues seem to stem from the implementation of secretive policies, which confuse drivers and riders alike. On the bright side, Uber has said they are now working toward a more transparent and honest system.
Hopefully, next time Uber’s name ends up on the front page, it’ll be in a more positive light.
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