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Honolulu City Council OKs nation’s first cap on ride-hailing ‘surge pricing’

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    Honolulu’s City Council on Wednesday approved a bill to limit “surge pricing” by ride-hailing operators such as Uber and Lyft. Above, Uber driver Joshua Oh drove Wednesday in Honolulu.

A bill that would lead to a cap on how much Uber, Lyft and other transportation network companies on Oahu could charge during peak hours won a 6-3 approval from the Honolulu City Council on Wednesday.

Uber and Lyft officials say that if it becomes law, Bill 35 would be the first in the United States to place a ceiling on how much they can charge.

The vote throws into question the long-term future on Oahu of both companies, whose officials have argued that surge pricing is a critical component of their business models because it spurs an increase in drivers to go out when demand is at its highest. Officials from both companies, however, stopped short of saying the bill’s passage will lead them to cease operating in Honolulu.

Uber Hawaii senior operations manager Tabatha Chow, in a statement, said the bill was unnecessary because no one has complained to the city about surge pricing. “If implemented, this bill will restrict innovation, limit consumer choice and put the availability of Uber service on Oahu at risk,” she said.

Supporters of the bill, which include traditional taxi companies and their cabbies, say the measure is necessary to ensure the public’s safety by implementing stricter regulations and preventing ride-hailing companies from charging exorbitant amounts to passengers when they’re most vulnerable. They also argue that Uber and Lyft drivers should play by the same rules that they’ve had to work under for decades.

Wednesday’s vote does not ensure that a cap on surge pricing will go into effect. Mayor Kirk Caldwell and officials with the Department of Customer Services say they oppose a cap because they think the free market should decide how much a ride costs.

Caldwell has 10 working days to sign the bill, veto it or allow it to become law without his signature. If he vetoes it, it’s uncertain whether the Council would have six votes to override it and force it to become law. Six votes are necessary for an override, and of the six who voted “yes” Wednesday, members Ikaika Anderson and Trevor Ozawa said they were doing so with reservations. The others who supported the bill were Carol Fukunaga, Ann Kobayashi, Ernie Martin and Kymberly Pine. The three “no” votes came from Brandon Elefante, Joey Manahan and Ron Menor.

Even if it does become law, it’s unclear if the cap on surcharges would be implemented.

The bill states only that the customer services director would be required to set a maximum that a ride-hailing company could charge in surge pricing, but provides no guidance on how to determine what the ceiling should be.

Randy Leong, deputy customer services director, said his agency would need to call in experts to help decide what guidelines to use in determining a price cap. “We’re new to this,” Leong said. “Seriously, we just don’t have the knowledge at this point.”

Ozawa questioned whether the administration would even enforce a cap if it opposes the idea. Leong responded: “If it becomes law, we will move forward to set the rules.”

Timothy Burr, Lyft director of public policy, said his company will work with city officials “to make sure we can keep providing safe, reliable rides.”

Burr said that would include speaking to Caldwell about a possible veto and, if it still becomes law, working with city officials about formulating rules.

“This process is not done with this vote today,” he said.

More than 30 people testified for and against the bill.

Dale Evans, president and CEO of Charley’s Taxi, said the unrestricted operations of ride-hailing companies have given them such an unfair advantage that the ranks of Oahu taxi drivers have thinned to 1,000 from about 1,800 recently. “The market is saturated,” she said.

Matt James, a Lyft and Uber driver, said ride-hailing operators offer an alternative for those seeking transportation. The surge-pricing concern is an unnecessary one because potential Uber and Lyft riders can see in advance how much they would need to pay, he said, adding, “You have the option to take that ride or not take that ride.”

Councilwoman Kymberly Pine, among the most vocal critics of ride-hailing companies, questioned how an Uber driver could charge a sailor on shore leave $221 from Pearl Harbor to Waikiki.

However, several opponents of the bill said there’s no proof that such a ride ever occurred.

Correction: An earlier version of this story incorrectly had Charley’s Taxi president and CEO Dale Evans stating that the ranks of “her drivers” had thinned to 1,000 from about 1,800 recently. In actuality, she cited numbers for the overall ranks of Oahu taxi drivers, not just those in her company.
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