Bill targeting surge pricing after big events could impact Uber, Lyft

After a big sporting event or arena concert, fans flood city streets in search of a Lyft or Uber ride. To help meet demand, ride-hailing companies tack on surge fees that can substantially increase fares. The practice is meant to incentivize more drivers to offer rides — but some say that’s not how it’s working.

“There is not a connection between what the rider is charged and what the driver is paid,” said Sen. Emily Alvarado, a Democrat representing West Seattle.

Alvarado is sponsoring Senate Bill 5600, a measure being considered by Washington state lawmakers that would limit the amount Uber, Lyft and other transportation companies can charge passengers after large events.

The law would restrict fares to 120% of what the driver is earning for a ride. For example, if a customer pays a surge price of $100, the company’s share would be limited to $17, with the driver earning $83, in that scenario. The rules do not apply to tips.

The goal, Alvarado said, is to keep prices lower while assuring that drivers — and not just the companies — are well compensated during times of high demand.

The cost of trips with ride-hailing companies increased 7.2% last year, according to new research from analytics firm Gridwise. And more than 72% of passengers said they’ll reduce or stop their use of the services if fares rise further.

Uber and Lyft are pushing back on the legislative proposal, saying the measure won’t curb fares for passengers.

“This bill doesn’t actually set any upper limit on rider fares — it only limits the relationship between what the rider pays and what the driver gets,” an Uber spokesperson said via email.

A fair fare?

Ride-hailing companies differ in how they split fares with drivers, and it’s not clear how it pencils out during surge pricing periods.

Uber takes less than 20% of each fare on average for rides in the U.S. after accounting for insurance, taxes and other costs, according to a post from the company’s policy team in December 2023.

But two drivers testifying before lawmakers in Olympia earlier this month said they might earn half or less than half of the fare for rides.

Kyle Graham, who drives for Uber and Lyft, said he drove a couple home after the Taylor Swift concert, which ran two nights in Seattle in July 2023.

“They’re complaining about the incredibly high price they had to pay for a ride,” he said. Graham said the receipt showed the riders paid more than $200, and “not even half of the charge was to pay me as their driver, and instead was an excessive amount that was exploiting these peoples’ need.”

Zahid Arab, Uber’s public policy lead for its Western region, said a significant portion of the fares are applied to fixed costs including city and sales taxes and airport fees. The ride-hailing companies also cover auto insurance coverage, which have gone up significantly in recent years.

“If we’re restricted in how we balance fares, it could lead to fewer ride opportunities, fewer flexible working hours for drivers, and ultimately, a less reliable service for riders,” Arab told the Senate’s Committee on Labor and Commerce in his submitted testimony.

Uber reported that drivers and couriers earned $20 billion, including tips, during its most recent quarter, up 16% year-over-year.

Nicholas Johnson, a public policy director for Lyft, echoed those concerns in his testimony. He also noted that a year ago, the company made a commitment that its drivers would earn at least 70% of rider fares each week — once the company deducted the external costs, which includes insurance.

A bill for big events

A prime motivation for the proposal is the 2026 FIFA World Cup, which will include six matches played in Seattle in June and July and is expected to draw roughly 750,000 visitors to the state.

“We’re passing a number of pieces of legislation to help prepare for the World Cup and this is an important piece,” Alvarado said.

Other provisions of the legislation:

• Local jurisdictions are allowed to create zones where ride-hailing companies can safely pick up riders during large-scale events.
• Ride-hailing companies must provide a digital receipt to riders disclosing the amount that is paid to the driver, in addition to other details about ride costs.
• The surge price cap would apply to rides associated with large-scale events, which are defined as outdoor venues with 10,000 or more attendees, or indoor events with 1,000 or more attendees. It does not include religious or K-12 educational events.

Both Arab and Johnson said that it will be too difficult to determine which games and concerts will hit the large-scale event threshold and trigger the cap under the proposed legislation. Alvarado said she would be happy to work with companies to find a solution.

‘Unintended consequence’

Those testifying in support of SB 5600 included a representative from the Seattle FIFA World Cup Local Organizing Committee; Peter Kuel, president of the Drivers Union; Afewerki Melaki of the Eritrean Association in Greater Seattle; and others.

Those against the bill were representatives from Uber and Lyft, as well as Vicki Christophersen of TechNet, an association representing technology businesses.

The Senate Committee on Labor and Commerce passed the bill on Tuesday, and it can now go to a vote by the full chamber. Its companion bill, House Bill 1951, has not had a hearing.

Washington has been a leader in regulating aspects of the ride-hail sector. In 2022, lawmakers approved first-of-its kind legislation setting minimum wage and other benefits for Lyft and Uber drivers, while maintaining their status as gig workers and not company employees.

The measure, House Bill 2076, was hailed as a compromise between the interests of drivers and ride-hailing companies and took years to hammer out.

Christophersen testified before the committee that the proposed bill “conflicts” with that earlier legislation.

“The complication here is that the bill doesn’t take into account the very real complexities that go into pricing models,” she said, “and it could have the very unintended consequence … of seeing higher fares for individuals.”

Editor’s note: Headline updated to reflect the bill’s language.

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