A cap will be introduced on what ride-hailing services like Uber and Lyft can charge during periods of peak demand in Honolulu.
The Hawaiian capital’s city council passed the motion – the first of its kind in the United States – by six votes to three on Wednesday.
The measure prevents “surge pricing” if increased rates are higher than the maximum fare set by the city.
Oahu taxi drivers have been at odds with those who drive for mobile apps that connect riders with nearby drivers.
Taxi companies complain that companies such as Uber and Lyft create an unfair playing field because they face fewer restrictions.
Uber has been told the city has not received any consumer complaints about surge pricing, said Tabatha Chow, the company’s senior operations manager for Hawaii.
Honolulu has the highest taxi prices in the nation and Uber is 40% cheaper, she told council members on Wednesday.
Surge pricing only happens during peak times such as rush hour, weekend nights and big events, she said, adding that fares go back down when more drivers are on the road.
Robert Deluze, owner of Robert’s Taxis, said ride-hailing companies have hurt the taxi business and questioned why Uber and Lyft need to use surge pricing if their fares are cheaper.
Councilwoman Kymberly Marcos Pine, who voted for the limits, said she was concerned to hear that US Navy sailors getting off ships in Pearl Harbor recently were charged as much as 221 dollars (£165) to get to Waikiki when a cab ride was 44 dollars (£33).
As the wife of a sailor, she said she wants to protect service members from being “price gouged”.
Uber said surge pricing gives drivers the incentive to work in busier areas, which lowers wait times for riders and ensures reliability.
Riders and drivers who submitted testimony opposing the measure said taxis are not as reliable or affordable as ride-hailing companies.
Uber driver Lisa Gonzales wrote that she drives to help support her family of six.
During surge pricing, passengers have the option to accept or reject costs, she said, and that it is based on supply and demand.
Uber and Lyft officials testified in City Council committees last month that the cap on surge pricing would be the first such restriction on the companies in the country, the Honolulu newspaper reported.
Council Chairman Ernie Martin said he wrote the measure to ensure consumers won’t pay an “unreasonable price.” He said companies will still be able to employ surge pricing — or as he prefers to call it, “predatory pricing” — within limits.
The measure would set precedence nationwide he said, adding: “Other cities are struggling with this as well.”
