Honolulu lawmakers pass 'surge pricing' cap for ride-hailing companies

FILE PHOTO: The logo of Uber is seen on an iPad, during a news conference to announce Uber resumes ride-hailing service, in Taipei, Taiwan April 13, 2017. REUTERS/Tyrone Siu/File Photo

(Reuters) - Honolulu could become the first U.S. city to limit fares ride-hailing companies can charge when demand spikes, following a city council vote on Wednesday, the Honolulu Star-Advertiser newspaper reported.

Ride-hailing companies such as Uber Technologies Inc [UBER.UL] and Lyft Inc use a model known as “surge pricing” in which the fare for a ride rises when factors such as rush hour and bad weather increase demand for the service.

The practice could be limited in the future in Hawaii’s largest city after the Honolulu City Council approved by a 6-3 vote a bill requiring city officials to cap surge pricing by ride-hailing companies, the newspaper reported.

For the bill to become law, however, it still needs to be signed by the Mayor Kirk Caldwell, whose administration appears to oppose the measure, reported.

The city Department of Customer Service said it opposed the measure because ride-hailing company customers already know the fare they will be charged, which is not the case with taxi cabs, the news website reported.

Uber also made the case that riders know the fare upfront the Honolulu Star-Advertiser newspaper reported, citing a statement from the company. If the measure goes into effect, it would also restrict innovation, limit choice and could jeopardize availability of Uber service on the island, the company said.

The measure “is a solution in search of a problem, as we’ve been told the City hasn’t received a single consumer complaint about our dynamic pricing model,” Tabatha Chow, a senior operations manager, was quoted as saying in the statement.

Last month, officials from Uber and Lyft Uber told council members that a cap on fares would be the first such limitation imposed in the United States, the Honolulu Star-Advertiser reported.

Reporting by Brendan O’Brien in Milwaukee; Editing by Catherine Evans