Metro Manila (CNN Philippines) – The Land Transport Franchising and Regulatory Board (LTFRB) has officially set a cap for surge prices in Grab and Uber vehicles, it announced in an order from a hearing held with the two transport services Tuesday.
The order ruled that “the maximum allowable price surge on the fare shall be twice the rates for time covered and distance travelled excluding the base fare.”
Grab Philippines was also directed to “lower its fare per kilometer from P 12.00 – P 16.00 to P 10.00 to P14.00 depending on the type of vehicle used.”
This comes as the LTFRB issued warnings to transport network companies (TNCs) Grab and Uber after the services came under fire for unreasonable surge pricing over the holiday season. A surge in the price of the fare is said to reflect the demand for transport and the available supply of cars.
As the Christmas rush set in, patrons of the two vehicle services, which are a popular alternative to public transportation, reported surge prices from as low as P2,000 to P28,000 per ride.
The LTFRB directive will remain effective “until further Orders from the Honorable Board.”
Both Grab and Uber will be given ten days to file position papers on liability and accountability of TNCs and the reasonable determination of fares.
TNCs comply
Grab on Tuesday said it will cap its surge rate to twice the regular rate, following a reprimand from government on reported excessive fares charged on commuters.
Grab Philippines country head Brian Cu told CNN Philippines’ The Source that apart from placing a limit on the surge, it would also lower the fare per kilometer to reflect the existing traffic situation.
“Whereas before, prices could surge to two-and-a-half times, 2.8-x of the fare, we agreed to place a cap at the 2x limit and lower the per-kilometer fare,” Cu said in the interview.
They will be coordinating with their engineers and counterparts in Singapore to effect these measures, Cu added.
Cu said that “placing a ceiling on (prices) is something that can be done manually.”
Uber also agreed to a price cap that will be effective until January next year.
“I have talked to Grab and Uber separately in at least four occasions over the past five months and they have agreed to that policy that they are willing to submit to a level of regulation,” LTFRB Chairman Martin Delgra III told The Source prior to the hearing.
Supply and demand
Cu said that the surge, which is computed by an algorithm, also looks at factors like supply and demand.
“So on the 24th (of December), a lot of drivers were on holiday… but passengers continued to book,” Cu explained. “So that could have been one of the reasons why the system automatically padded the prices.”
He also clarified that the cars visible in the map of the application are not necessarily available vehicles, but those that may be completing trips nearby.
Delgra said that this feature “creates a wrong impression” and riders might mistake the supply to be high.
Cu said that they are working to resolve that feature with their engineering team and fixing it “should not be impossible.”
He also assured that Grab had an internal mechanism that monitored and hold accountable drivers who shut off the app to lower supply and manipulate prices.
LTFRB to scrap moratorium
Delgra also confirmed that the LTFRB will scrap the 13-year-old moratorium on bus franchises by “very early next year.”
“We have been working even during this Christmas season with the [Department of Transportation] that we’re going to lift the moratorium pretty soon with the new omnibus franchise policy,” he said.
Bus franchises were suspended due to allegations of corruption within the LTFRB concerning the issuance of the franchises.
CNN Correspondent Makoi Popioco contributed to this report.
