Is Uber’s Matching Market Illegal Price Fixing?
https://www.vice.com/en_us/article/d3adbv/this-case-will-decide-if-ubers-surge-pricing-is-illegal
A recent lawsuit against Uber argues the company’s market-clearing algorithms and surge pricing constitute illegal price fixing. Uber drivers have no say in the pricing of their services, yet Uber claims they are independent contractors instead of employees. This disparity, the lawsuit argues, is illegal price fixing because the law requires independent contractors to set their price for their own services. This lawsuit is an especially interesting take on the matching market model that dominates Uber’s business model. While I understand how surge pricing is a useful tool to better control supply and demand for rides, I wonder to the extent a lack of competition between drivers may have negative effects on the larger market. As the market exists right now, there is only competition between different ride-sharing platforms. Despite Uber’s efforts to cut labor costs and increase revenue via surge pricing, the company still operates at a loss. Ultimately, the lawsuit also hints at the larger question of whether drivers should be considered employees or independent contractors of Uber.
As discussed in lecture, a traditional matching market would have several providers (drivers) and buyers (customers). Through an algorithm that continually raises prices, businesses can easily manipulate a market to create perfect matchings and clear the market. This concept is particularly interesting in light of this lawsuit against Uber. The lawsuit argues that the surge pricing model only creates a ruse of perfect matching, since drivers (and sellers) cannot set their own prices and are not employees of Uber. However, to buyers, The seller is much more complex than the individual driver. When a consumer requests an Uber ride, he or she does not request the services of a particular driver. To a consumer, the matching market is between consumers and ride-sharing companies, or different times of the day where driver supply can affect pricing. Additionally, when a driver signs up with Uber, they consent to the fact that they are unable to set their own prices — their salaries are at mercy of consumers and Uber’s algorithm.
Personally, I believe the gig economy has posed many complex labor issues — and Uber drivers bear the blunt of these complexities. Perhaps some more market competition, and more clarification on what Uber’s matching market actually entails, can ensure a better outcome for all players.