Gig Economy Project – Spanish study finds Uber, Bolt and Cabify charge customers more in poor neighbourhoods than rich ones

First-of-its-kind study also claims that private hire platforms in Spain indirectly price fix and break labour laws. Read the full report in English here.

Press conference to launch the study (Picture by TAS)

A ground-breaking study examining the algorithms of private hire platforms in Spain has found that Uber, Cabify and Bolt are in breach of competition, labour and consumer protection laws due to indirect price fixing, algorithmic punishments of drivers, and geographic price discrimination. 

The study, which was published on Wednesday [29 March], was conducted by Eticas, a research and consulting company specialising in algorithmic auditing, Taxi Project 2.0, a taxi worker think-tank, and the Observatory of Work, Algorithms and Society (TAS), a new institution established at the end of 2022 to investigate the platform economy from a worker perspective.

The “adversarial audit of ride-hailing platforms” used a combination of digital tools and traditional methods to independently examine the ‘black box’ algorithms which are kept hidden from workers and consumers alike.

On consumer protection, the authors gathered Uber, Cabify and Bolt passenger data on fares for 20 routes from Madrid and Malaga, in different neighbourhoods with varying levels of income. They found that, because wealthier neighbourhoods tend to use private hire platforms more, the supply of VTC drivers to those areas was easier and thus the pricing algorithms maintained lower prices as there was less need for incentives to attract drivers. To attract drivers to poorer neighbourhoods where there was less demand, the algorithm set prices higher.

“The result is that you are discriminating against customers based on their income level,” Gemma Galdón, founder of Eticas, said. “If I have to take a VTC to go to the hospital and I live in a low-income neighbourhood, they are going to charge me more for the trip than if I lived in a wealthy neighbourhood.”

This pricing policy could be in breach of Spain’s ‘General Law for the Defense of Consumers’, which protects consumers from discrimination based on place of residence.

The report also claimed to have evidence of indirect “algorithmic price fixing”. Academic studies have indicated that similar or self-learning algorithms tend towards systematic collusion, even in the absence of direct co-ordination. In this study, the prices of routes in Madrid and Andalusia over a three month period are examined through a combination of data scraping and the “sock-puppet” method, where automated trip requests were sent every 10 minutes between October and January 2022. 

“The pricing algorithms of Uber, Cabify and Bolt are colluding in some of the most important routes in Andalusia and Madrid,” the authors’ write. “Despite the fact that there is no explicit agreement between the companies, there are indications of indirect price fixing through algorithms. This creates unequal competition conditions and harms other market agents, such as traditional taxis and new operators.”

This would also be in breach of the Law 15/2007 on the Defense of Competition in Spain, which considers the “fixing, directly or indirectly, of prices or other commercial or service conditions” to be “collusive conduct”. 

Finally, the report found that the intermediary companies which operate between the platforms and drivers, and are considered to be the employers of the drivers, are ultimately secondary in the management chain to the algorithms. Interviews with VTC drivers at Uber, Cabify and Bolt found that the algorithms can still directly block workers from connecting from the app if, for example, there are too many trip cancellations or customer complaints. Other potential abuses of labour laws identified include failure to take account of legitimate absences from work, doubts about whether drivers are receiving all tips and lack of transparency over pay performance incentives.

“There are already rulings in Spain that condemn the VTC car fleets for not respecting labour rights and, specifically, the right to sick leave,” Galdóns said. “The Uber, Cabify or Bolt apps do not allow you to specify, for example, the reason for absenteeism. If you’re on sick leave for a week, is your algorithm going to penalise you? The drivers we’ve talked to think so. The ball is on the side of the companies, right now, you can’t say they’re complying the law on labour matters.”

The report concludes by calling for new investigation by the competition regulator, the National Commission of Markets and Competition (CNMC), on the basis of its findings. the CNMC conducted an investigation in 2019 into price-fixing and gave the platforms the all-clear, although one board member voted against the resolution, saying that one of the cases was not properly investigated.

The report also calls on the Ministry of Labour and the Ministry of Consumer Affairs to investigate the potential breaches of labour law and consumer protection rights respectively. 

Sergi Cutillas, an economist and researcher at TAS, said the investigation was the “first work in the world that demonstrates with a large abundance of data that the dynamic pricing algorithms of the platforms agree prices.”

“With algorithms, companies no longer have to sit around a table to agree on prices or share out the market, so competition authorities must focus their efforts on these new automated mechanisms,” he added.

“This study leaves the CNMC in a very questionable position, it shows that they are incapable of putting the focus where it has to be,” Alberto Tito Álvarez, coordinator of the Taxi Project and leader of the taxi union Élite Taxi Barcelona, which is being investigated by the CNMC for alleged infringment of competition laws, told El Confidencial. “We have had to take care of the job that falls to them, which is to uncover with studies and investigations that through the algorithm you can laugh at the authorities by constantly violating the law.

“We hope that the competition authorities, given the flagrant evidence presented in our investigation, realise that their current position on this issue favours monopolies.”

El Confidencial reports that neither Uber nor Cabify have wanted to comment on the study directly, with Uber stating: “We scrupulously comply with all competition, labour and consumer protection regulations.”

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