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Uber’s Toronto Price Gouge Gives the Car Service a PR Headache

Jul 18, 2013

On July 8th, residents of Toronto (myself included) watched as a record-breaking storm and flash floods swept across our highways and through the streets, dumping about four inches of rain in less than two hours.

Traffic sloshed to a halt as sewage-laced water reached our doors, zapping batteries and engines and leaving thousands of drivers stuck on the road. The city’s GO Trains, subway tunnels and underpasses were crammed and 300,000 or more homes and businesses lost power. Our office was down for a couple of hours, too.

With so many people stranded in the flooded city, naturally the demand for taxis and car services was insane. If you happen to be a taxi driver, you’re obviously going to be in very high demand. So what does the car-service company Uber do? It jacks up its prices on some of its services.

Now I’m a huge fan of Uber as is my colleague, Vanessa Horwell . The service is incredibly efficient, fast and easy to use. During times of high demand, like holidays such as New Year’s Eve or Valentine’s Day, Uber institutes “surge pricing,” an increased price meant to motivate its partner drivers to get out on the road to make pickups. For example, on New Year’s, prices can be up to six times higher. We’ve come to expect that from taxis all over the world – and now Uber – so no biggie there.

But last week was not a holiday or New Year’s Eve and in no time at all, angry Torontonians were venting their frustration on social media and blogs about Uber’s price gauging. Entrepreneur and Medium blogger Aron Solomon penned a snappy reprimand called “The Don’t Be an A**hole Rule.”

Our city’s backlash was strong enough that the company was forced to respond on its own blog, explaining that it didn’t hike prices on its regular Taxi service, just on the more expensive Black Car service, which sends luxury vehicles.

But I doubt very much that the thousands of stranded and desperate Torontonians cared what kind of car came to their rescue. And it’s highly unlikely that people were booking fancy rides in their rain-soaked clothes for non-emergency purposes on that particular afternoon.

To Price Gouge or Not to Price Gouge?

There’s no easy answer to the question of whether or not to ban raising prices for essential goods such as water, food and gasoline when demand shoots up in the wake of a disaster. There are those who argue that what many call “price gouging” is actually healthy in such a situation, saying it encourages people to buy only what they need rather than excessively hoarding supplies.

But for many others, like the merchant who marks up prices on essential goods or services in the wake of a disaster is considered an opportunistic profiteer. Last week’s Uber incident makes it clear that companies providing basic needs such as transportation need to carefully consider how to respond to disasters on a case-by-case basis.

For instance, I don’t object to Uber’s price-surging on occasions such as New Year’s, when demand for rides is unusually high – the higher prices mean more partner drivers on the road and more customers served. After all, going out on New Year’s is not a basic necessity, it’s a chosen privilege.

And  I understand merchants’ incentive to hike prices during times of high demand, particularly in areas prone to disasters – Florida comes to mind. Allowing price hikes could incentivize people to be better prepared ahead of time. It’s a complex issue and we could spend hours arguing it.

But Toronto isn’t a place known for frequent large-scale disasters and this wasn’t the kind of storm Torontonians are used to preparing for.

This was a freak tempest the likes of which Toronto hasn’t seen in ages, according to news reports. In this particular case, Uber would have done better to follow the example of competitor Hailo, which didn’t just refrain from raising prices. Hailo also kept up a steady stream of weather, safety and transportation-related updates on Twitter.

This isn’t a crippling misstep for Uber. This contretemps will blow over. However, it is a PR lesson the company should take to heart. When disaster strikes, the best thing a brand can do is step back, assess the situation, plan its response and, if still in doubt, err on the side of selflessness.

What’s the cringe-worthiest disaster response you’ve ever seen from a brand? Share your stories with the ThinkInk community in the section below.

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