Business & Tech

Uber under state investigation for surge pricing during storm emergency

Associated Press
The ocean battered beachfront homes in Marshfield during the March 6 storm.

Shortly after Governor Charlie Baker declared a state of emergency during a storm in March, government officials sent an e-mail to Uber, Lyft, and other ride-hailing firms, warning the companies not to raise prices for riders until the emergency was over.

But Uber apparently did not follow the directive and is now under state investigation for using its long-controversial surge pricing tactics, which boost fares based on the number of riders and drivers on the road.

The state Department of Public Utilities, which oversees ride-hailing services, has asked Uber to document its fares before, during, and after the state of emergency, which lasted from March 3 to March 6. The state is also asking for revenue information and the number of drivers that worked during the period.

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The investigation, originally reported by the Boston Herald, is the first of a ride-hailing firm by the DPU since new state regulations took effect last year.

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At issue is a 2016 Massachusetts law meant to prevent the ride-hail firms from using surge pricing during major storms, catastrophes, and other officially declared states of emergency.

But Uber — which does not deny raising prices during the storm — argues the language of the law does not actually ban surge pricing.

The law says companies “shall not raise base fares” during an emergency. Uber maintains that means it cannot increase its normal rate, but is not barred from multiplying the rate during periods with high demand.

“We are confident we complied with the law and our team was in communication with the DPU during the State of Emergency,” Uber spokeswoman Alix Anfang said. “We look forward to working with regulators on a quick resolution.”

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Lawmakers, however, were clear about the intent of the language back as they crafted the rule two years ago. At the time, members of the House of Representatives circled a description of an early version of the legislation that read: “No surge pricing in weather emergencies.”

Uber has a reputation for fighting or skirting rules, but after a series of scandals, new leaders have said the company wants a more collaborative approach with government agencies. Still, the DPU investigation comes amid a fight Uber is having with officials at T.F. Green Airport in Rhode Island, where the company this month stopped picking up passengers due to a dispute over fees.

Uber’s top competitor, Lyft, did not take the same legalistic approach to the March state of emergency. It suspended surge pricing during the storm, according to spokeswoman Campbell Matthews.

“We interpret the law to prohibit price surging during states of emergency,” she said. “The DPU later confirmed in an e-mail that [surge pricing] should be suspended.”

The DPU controls Uber’s license to operate in Massachusetts and has the power to suspend or revoke licenses, or fine companies, if they violate the law. But a spokeswoman for the department didn’t say what disciplinary action Uber may face if it is found to be non-compliant.

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Uber has long said that surge pricing is important to manage the supply and demand of its service, giving drivers an incentive to stay on the road in poor conditions and deterring some riders during busy times.

The company has been criticized in the past for boosting prices during dire situations, such as a hostage crisis in Australia. But in 2016, Uber took a different tack by turning off surge prices after an explosion in New York City.

Since 2014, Uber has placed a cap on prices during emergencies that is based on surge rates in the preceding several weeks. The company said it followed this policy during the March storm.

Adam Vaccaro can be reached at adam.vaccaro@globe.com. Follow him on Twitter at @adamtvaccaro.