Grab fares surge under opaque algorithm

The surge charges customers paid for trips significantly differed depending on where they got picked up, the data showed. Passengers from Makati, Taguig, Las Piñas City, and Pasig paid higher surge rates on average. Meanwhile, lower multipliers were recorded in pick-up locations in Manila, Parañaque, Pasay, and Valenzuela.

For example, a six-kilometer ride from Makati to Taguig on Feb. 17, 2024 at 5 p.m. cost P381. Without a surge, the ride should cost about P215. The estimated surge rate was P166 or 1.98 times the distance and duration fees. ​​The surge fees on this day ranged from 29% to 44% of the whole fare.

Roughly the same trip distance within Valenzuela on the same date and time incurred a P64 surge fee. This was 1.5 times of the per-kilometer and per-minute cost. Grab charged P239 on the app. The surge fees on this day ranged between 23% and 31% of the entire fare.

Verifying app fares with API data

As a way to verify, we compared the data collected manually from the Grab app with the data collected via Grab’s fare check API. The online tool as shown below provided estimates of the minimum and maximum fare and the duration of the trip.

When compared, the app fares were consistently above the minimum fare approximated by Grab in its own fare check page. This supports the finding that the rides PCIJ tried to book on the app always incurred surge fees. Moreover, it tended to be on the high side.

The chart below shows that each booking (see black line) was also close to or more than the maximum fare estimated by Grab across the 10 routes.

API data: No surge?

Based on data collected from Grab’s fare check API, the company tagged each ride as “high surge,” “low surge,” or “none.” The same notices are not shown on the app, although it sometimes prompts customers to “beat high fares by booking later.”

Nearly two in three rides had a “None” surge notice in the API data, while the remaining rides were mostly “high surge” with a few “low surge”. This was inconsistent with what we found on the app where the surge fees were always added. Based on our data, there was always an extra amount charged on top of the P45 base fare, P15 per kilometer, and P2 per minute costs set by the LTFRB.

Curiously, the Makati-Taguig route in the API data registered a “high surge” throughout the week 24/7, every hour, even past midnight of the research period.

Grab did not directly address PCIJ’s question on why there was always a surge, but it did say that surge pricing was not predetermined by time but by real-time conditions.

“The discrepancy in surge notice(s) may result from variations in demand and supply at specific times and locations. The ‘High,’ ‘Low,’ or ‘None’ indicators are dynamic and can change rapidly as the system continuously processes new data to maintain balance and efficiency,” Grab said.

Grab added that its algorithm took into account a variety of factors, including traffic congestion, geographic location, the supply of drivers, and demand for rides.

“It operates dynamically to ensure that fare adjustments reflect the real-time market conditions. Surge is not manually set, but run by a real-time algorithm,” Grab wrote.

Gustilo, for his part, said that because algorithms are programmed by people, they need to be checked. Decisions driving their design will affect those who use the technology, he said.

Like Inton, Gustilo has been on the receiving end of complaints from both customers and drivers using the app. He himself found surge pricing puzzling as he had done his own fare monitoring. One time he checked the rate from his location to a destination hourly, from 5 a.m. until midnight. The data he collected showed that prices did not change much throughout the day, which led him to think that either no surge pricing was in effect or there was always a surge the whole day.

“My point is, is Grab always on surge all day? Which is the same question asked by many passengers. Kasi nga, sobrang mahal na mag-Grab ngayon e (Taking a Grab now is so expensive.) Grab’s justification with surge pricing is demand. But drivers tell me, ‘Matumal ‘yung biyahe.’ So how do you reconcile that?” he said.

Does surge pricing get more cars on the road?

According to Grab Philippines, surge pricing is “an industry-accepted, sophisticated and scientifically developed algorithm-based feature driven by real-time supply and demand dynamics.”

“It ensures optimal allocation of resources by incentivizing more driver-partners to meet high demand, thereby enhancing service reliability. This mechanism is similar to economic principles applied in various sectors to balance supply and demand effectively,” the firm added.

If the algorithm was working as Grab had advertised, wait times should stay the same or become shorter when surge pricing took effect. However, relatively high surge multipliers lasted several hours without reducing wait times, the API data showed. This was not helpful for commuters because to realize a significant drop in the fare, they would have to wait much longer.

For example, on Feb. 20, 2024 (a Tuesday) from midnight to 11:45 p.m., the Makati to Taguig City route recorded a notice of “High Surge” the whole day. The estimated average wait time was 3.4 minutes that day. It peaked at 11 minutes at 7:45 a.m., but didn’t go back to the average until 10 a.m. From 3:15 p.m. to 9:45 p.m. on the same day, the wait time averaged at four minutes. It wasn’t until past 10 p.m. when wait times generally dropped to a minute or two.

Statistical analyses conducted by PCIJ did not yield conclusive results. The routes exhibited both positive and negative correlation between surge rates and wait times, which suggested that surge pricing did not always work to improve service quality, measured roughly as a reduction in wait time.

The routes that resulted in a positive correlation were pick-up points in the central business districts like Makati and Taguig. The surge rate and wait times in these areas tended to go in the same direction. It could be inferred that customers in these cities ended up waiting for a long time even with surge pricing.

Meanwhile, some routes did result in a negative correlation, meaning higher fares could be associated with shorter wait times. However, they were not substantial, which could mean that surge pricing had a minimal effect.

Grab acknowledges PCIJ finding

Sought for an explanation, Grab confirmed that surge rates could become “prolonged.”

“In some cases, high demand periods may persist, leading to prolonged surge pricing. The aim is to attract more drivers to areas with high demand, thereby reducing wait times over time. Continuous adjustments are made to ensure optimal service delivery,” Grab wrote in its response.

The firm said surge pricing was designed to address supply-demand imbalances but was not a static solution. The duration and impact of surge pricing depended on factors such as driver availability, demand surges in specific locations, and traffic congestion, it said.

On May 28, 2024, about a week after PCIJ wrote to Grab, the ride-hailing company was reported as asking the government to increase the number of TNVS vehicles in Metro Manila back to the pre-pandemic level of 65,000 to keep up with growing demand.

“Grab is struggling to serve the ride-hailing demand in Metro Manila, lamenting that TNVS supply is short of the pre-pandemic high of 65,000. The TNVS supply is around 40,000 slots as of end-2023,” PhilStar.com reported.

Persistently long wait times could also mean that drivers were not encouraged by surge pricing. At least a dozen drivers interviewed by PCIJ said that they didn’t necessarily go to “surge” areas or the areas marked red on the app map because that would mean getting stuck in traffic.

They simply relied on the “bato” or the booking provided by the app, the drivers said. They spoke to PCIJ on condition of anonymity for fear of retribution.

Unchecked algorithms

PCIJ reached out to four relevant government agencies to learn more about how algorithms are regulated. Of the four departments, only the Department of Information and Communications Technology (DICT) and the Philippine Competition Commission (PCC) responded.

PCIJ has sent several requests and made follow-ups to the LTFRB since November 2023. The letters were acknowledged but not addressed. We wanted to ask the transport regulator about the status of its surge pricing inquiry and other related regulatory concerns.

The Department of Trade and Industry’s Consumer Protection Group asked for and was given a list of interview questions but did not respond to our request.

Only the DICT agreed to an interview. Assistant Secretary Philip Varilla said the department did not have a regulatory framework for ride-hailing applications. Its focus is on information shared by customers, he said.

“Our attached agency, the National Privacy Commission, does some Privacy Impact Assessment. Basically, it is in relation to personally identifiable information. And with cybersecurity, we have our Cybersecurity Bureau, and they follow our Cybercrime Prevention Act, the National Cybersecurity Plan, as well as the Consumer Act of the Philippines to protect consumers. So, as for a regulatory framework specifically for ride-hailing applications, we don’t have one,” he said.

Making algorithms accountable

In the absence of regulations about algorithms, risks abound, according to experts.

Dominic Ligot, co-founder of social impact technology company CirroLytix, said that while the Data Privacy Act and the Cybercrime Law cover abuses using technology or abuses on data, they do not cover algorithmic bias or algorithmic abuse. New laws are needed to cover algorithmic liabilities, he said.

Apart from legislation, designing an Algorithmic Impact Assessment or AIA might be helpful, Ligot said. It’s similar to the Privacy Impact Assessment under the Data Privacy Act. PIAs are a checklist of data being gathered, how they are processed, and who’s going to be accountable when there’s a data breach, for example.

An AIA can be a checklist that includes risks posed by an algorithm, among others, Ligot said.

“Let’s spell it out. And then if we’re comfortable with the risk, sign, so that later if it blows up, ‘Okay, wait, who assessed this? And then we learn.’ At the bare minimum, we should have something like that for accountability and transparency,” he said.

This problem is not unique to Grab. Ride-hailing companies in other countries, like Uber, have been criticized for using surge or dynamic pricing to make a profit instead of managing supply and demand.

Researchers have warned against algorithmic abuse in cases where companies raise surge rates more frequently than required due to weak regulation or the lack thereof.

The Organization for Economic Co-operation and Development (OECD) for instance has highlighted concerns about the widespread use of algorithms in digital markets exhibiting characteristics that may lead to anti-competitive behavior.

Grab’s market dominance remains unchallenged

Grab not having a competition adds another layer to the problem.

In 2018, the Philippine Competition Commission cautioned against Grab acquiring the Philippine operations of its lone and credible rival, Uber, stating that it would undermine competition. But the antitrust body later cleared the merger when Grab committed to address service quality and transparency concerns. Six years later, Grab’s market dominance remains unchallenged.

Indonesian ride-hailing startup Go-Jek, the only potential competition to Grab, tried several times to enter the Philippine market, but faced numerous roadblocks.

The LTFRB in August 2018 imposed a moratorium on new applications from ride-hailing platforms, saying it needed to review the effect of the cap on the pool of the 65,000 approved TNVS units.

Go-jek re-applied several times but was rejected because of the 40% foreign ownership limit for public transport services, according to Bloomberg.

The Philippine Constitution requires companies to be least 60% Filipino-owned to operate public-utility services. Go-jek has a local subsidiary, Velox South-East Asia Holdings, but only about 20% of it was reported to have been owned by a Filipino shareholder.

Go-jek’s car-hailing unit, Go-Car, helped push Uber out of Southeast Asia and outgrew Grab as the most popular ride-hailing service in Indonesia, the Financial Times had reported.

Former LTFRB board member Inton said the exit of Uber ultimately favored Grab.“Why? Because it’s only Grab. There’s nothing else. But that situation should be regulated. Otherwise, Grab will be over and above regulation already. And Grab is so big now. The perception is that it is untouchable already, which should not be the case,” he said.Inton urged the LTFRB to start scrutinizing surge pricing.

Grab violates commitments

Since the 2018 merger, the PCC has been looking into Grab’s operations and issuing penalties on the company because of its failure to comply with its commitments, particularly with pricing issues.

The PCC explained in a written response to PCIJ’s queries that in principle, Grab must keep fares within a range as if a competitor like Uber were present in the market.

Asked how it monitors Grab’s compliance with its merger deal commitments, the PCC said it tracked Grab’s compliance through third-party monitors using reports generated by Grab. Grab submitted quarterly reports to the PCC.

The PCC, in turn, furnished the monitor with copies of these reports. The monitor then informed the PCC of its assessment, including any findings of non-compliance. (The PCC declined PCIJ’s request for a copy of the quarterly monitoring reports because these are supposed to be “confidential.”)

The PCC said it had penalized and fined Grab for violations of its commitments in multiple instances. Fines have totaled P86.7 million over the years since the merger. The amount includes a P16 million fine in October 2018 for violating key provisions of the Interim Measures Order (IMO) during the merger review period and a P9 million fine in February 2023 for providing incorrect and misleading information in compliance reports and failure to comply with PCC orders.

The PCC has also ordered Grab to refund a total of P25 million to its riders for violating price monitoring commitments. Of this amount, P4.7 million will be remitted to the National Treasury because it was not claimed by eligible Grab riders.

According to Grab, all fines have been paid in full and on time, but the PCC clarified that Grab had yet to settle a P16 million fine, which is the subject of a petition for review before the Court of Appeals.

However, the PCC pointed out that Grab’s commitments to service quality and fare transparency have expired and were no longer being monitored by the PCC. The only remaining commitments under monitoring, it said, were about non-exclusivity and incentives. These pertain to drivers who are not supposed to be tied to just one ride-hailing company.

Grab buys Move ItDigital and transport advocates also claim that Grab has monopolized the four-wheel transport service and that the company will soon monopolize the transportation sector. This is in context of Grab’s acquisition of motorcycle taxi firm Move It.Grab Philippines has a different perspective, pointing to a “competitive” market of 18 Transport Network Companies (TNCs) accredited by the LTFRB. As regards its acquisition of Move It, Grab stressed that the PCC, the competition watchdog, had cleared the transaction.

“Digital ride-hailing services, both four-wheeled and two-wheeled, are just one segment of the entire transportation landscape. The sector remains competitive, with numerous players and options available to the public. Grab’s acquisition of Move It does not alter the conditions that have contributed to the competitiveness and dynamism of the transportation sector,” Grab claimed.

While it’s true that there are several other players in the Philippines, none have the financial and technical resources to threaten Grab’s market dominance.

Apart from legislation and setting up AIAs, the government needs to foster innovation, especially now when there isn’t much incentive to build competing apps, Ligot said. If there are no incentives, the Philippines will be beholden to foreign companies, he said.

“Grab had this first-mover advantage. Or rather second. Uber came first. And you can see how it really shredded the taxi industry. Partly because of the taxi industry also. It’s an ugly experience, right? They rig the meter. It’s inefficient. Suddenly, an algorithm comes and makes it efficient. But now we’re hostage to the algorithm,” he added.

That’s a hard pill to swallow for many commuters, drivers, and riders to whom ride-hailing apps have become a lifeline.

Torres’ family eventually decided to move to a place near the son’s school. She no longer takes GrabCar every day.

But she still takes it whenever she’s with her kids or family. “I would rather that I take Grab. (One main reason) is the traceability, in the event something happens,” said.

She’s hoping for alternatives.

“Hopefully, once my kids are a bit older, maybe they can take a cab instead. But for now, that’s not the case yet,” the mother said. –PCIJ, July 2024

This story was produced by the Philippine Center for Investigative Journalism in partnership with the Pulitzer Center’s AI Accountability Network. 

The story was reported by Pulitzer Center’s AI Accountability Network fellow Karol Ilagan and data specialist Federico Acosta Rainis.

Jabes Florian Lazaro contributed reporting and research for the article. 

Data collection was done by Angelica Alcantara, Jay-ar Alombro, Donna Clarisse Blacer, Lyjah Tiffany Bonzo, James Kenneth Calzado, Gina de Castro, Maverick de Castro, Dominique Flores, Lois Garcia, Guinevere Latoza, Aya Mance, Faith Maniquis, Karmela Melgarejo, Gabriel Muñoz, Arone Jervin Ocampo, Matthew Raralio, Arriana Santos, and Angelica Ty.

Felipe Salvosa II was the lead editor.

Photographs were taken by Bernard Testa. Illustrations were created by Joseph Luigi Almuena.

Data visualizations were designed by Karol Ilagan, Federico Acosta Rainis, and Kuang Keng Kuek Ser.