Surge pricing or price gouging? Consumers brace for new reality

By Michael Talbot

The concept of surge pricing is nothing new. When demand is high, prices go up. It’s as old as commerce itself.

But the term wasn’t really part of the vernacular until Uber’s uncanny acceleration from a curious start-up to a ubiquitous and controversial part of life in most major cities around the world.

Consumers often expect and accept that prices will fluctuate in some industries. Sports fans, for example, are no strangers to their own version of surge pricing. Just try snagging Leafs tickets on a Saturday night when they’re playing the Habs. In the playoffs, prices further skyrocket. Thankfully, that’s rarely a concern in Toronto.

But when Uber introduced its surge pricing model, consumers were caught off guard because they were accustomed to the fixed price associated with traditional cab fares.

Surge pricing had crept into a new industry and many were unprepared for the new reality.

One student told 680 NEWS he was blindsided by a spooky $663 bill for an Uber ride on Halloween, when surge pricing was in effect.

Others defended Uber’s surge pricing model, saying without it, the public would lose.

But anger reached a boiling point in Toronto during a huge subway shutdown last summer. Scores of desperate commuters flooded out into the streets, and many jumped into Uber vehicles, which were charging three to four times the normal rate.

“Dynamic pricing helps bring demand and supply into line, when necessary, by incentivizing more drivers to come onto the platform,” an Uber spokesperson said at the time. “Once demand falls or supply increases sufficiently, prices quickly go back to normal.”

Despite those assurances, surge pricing suddenly had a new name – ‘price gouging,’ and many consumers fear it’s just the tip of the iceberg.

On Tuesday night, Toronto city council approved new rules that would allow Uber to operate legally in Toronto. Under the new rules, taxis will be able to adopt surge-pricing – but only for fares that are booked through an online app.

Cineplex has also examined the concept of surge pricing, but as CEO Ellis Jacob explained, surge pricing is something “we have not implemented and aren’t looking at presently.”

Ryerson professor, Dr. Gabor Forgacs, says surge pricing is more prevalent than we may realize.

“A number of businesses have already adapted the dynamic, demand-based pricing for their products and services,” he told CityNews. “The airline industry and the commercial accommodation industry and to a limited extent even the restaurant industry have been pricing differently as a result.”

Forgacs says it’s not all bad news when it comes to Uber and taxis.

“Those who need to take a cab at peak time may benefit from shorter waits and more availability. Those drivers that have the flexibility to work mostly during peak hours may benefit as well.”

But consumers suddenly faced with the prospect of wildly fluctuating prices for items and services that used to have a fixed cost, expressed their frustration online.

Are you concerned that surge pricing will become the new norm? Let us know in the comment section or on our Twitter and Facebook pages.

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