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FTC takes action against Lyft for misleading earnings claims

Online Niel October 28, 2024

FTC takes action against Lyft for misleading earnings claims

October 28, 2024

The FTC’s vote to authorize the DOJ to file the complaint in the US District Court for the Northern District of California was approved by one vote.

After the Federal Trade Commission (FTC) filed a lawsuit against Lyft, claiming the company used deceptively advertising practices to mislead drivers about their potential earnings, the ride-hailing giant agreed to a proposed settlement.

The lawsuit, filed by the US Department of Justice (DOJ) on behalf of the FTC, cites misleading claims about driver pay and promises of “win guarantees” that failed to deliver what drivers expected.

According to the FTC, Lyft misled potential drivers during peak demand in 2021 and 2022. Lyft ads showed impressive hourly earnings — up to $33 in Atlanta, $41 in Portland and $43 in Los Angeles. However, based on the top 20% of drivers’ earnings, these figures were not what most drivers might expect. The complaint states that average earnings were inflated by as much as 30 percent and often included tips, even though many drivers assumed the tips were in addition to their hourly pay.

“It is illegal to lure workers with misleading claims about how much they will earn on the job,” said FTC Chairwoman Lina M. Khan. “The FTC will continue to use all its tools to hold businesses accountable when they break the law and exploit American workers.”

The lawsuit also addressed Lyft’s advertising of “earning guarantees,” promising set payments if drivers completed certain rides within a time frame. For example, Lyft announced that drivers could earn $975 for 45 rides in a weekend. However, many drivers reported disappointment when they realized the earnings guarantee would only cover the difference between their actual payment and the advertised amount. The FTC noted that the complaints came from drivers who assumed the warranty was a bonus, not just an add-on to regular earnings.

As part of the proposed settlement, Lyft agreed to ensure that its payment requests reflect drivers’ typical earnings. Lyft will also be prohibited from including tips as part of advertised hourly earnings and must communicate to drivers that the tips are intended to offset shortfalls rather than serve as bonuses. Lyft must maintain accurate evidence of its payment statements going forward to support these claims.

The settlement includes a $2.1 million civil penalty and requires Lyft to notify drivers of the revised policy. The action is part of a larger initiative by the FTC to protect economy workers from false earnings claims. The FTC also took action against Amazon, HomeAdvisor, Arise, and Care.com, securing millions in damages and injunctive relief for injured workers.

The FTC’s vote to authorize the DOJ to file the complaint in the US District Court for the Northern District of California passed by a 3-2 majority.