Lyft to pay $2.1 million after FTC says it misled drivers about revenue

• The US Department of Justice filed a lawsuit against Lyft on Friday.
• The FTC said Lyft made “misleading” claims about how much money drivers could make per hour.
• Lyft agreed to a proposed settlement that included a $2.1 million civil penalty.

Lyft has agreed to pay a $2.1 million civil penalty as part of a proposed settlement following a federal lawsuit, according to the Federal Trade Commission.

The US Department of Justice filed a complaint against Lyft on Friday, saying the ride-hailing company violated the Federal Trade Commission Act between April 2021 and June 2022.

The department said Lyft made “misleading earnings claims” in some advertisements about how much drivers could earn hourly — and in the form of special incentives.

“Lyft used an hourly wage calculation at the 80th percentile for a particular region. As a result, even based on Lyft’s own calculations, only the top 20% of Drivers—that is, only one in five Drivers—earned the specified hourly wage figures. in the ads,” the complaint states. “For example, in August 2021, Lyft claimed that drivers in New Jersey could earn up to $34 an hour, while Lyft’s own calculations put the average earnings at just $25 an hour.”

The Justice Department’s complaint said that “because Lyft presented the earnings claim as an hourly amount and did not disclose that tips were factored into the figure, many drivers likely believed that the tips they earned would be in addition to the hourly earnings advertised by the company “.

Lyft also shared an ad with “earnings guarantees”
which “misled” drivers into believing they would receive a guaranteed amount as a bonus on top of their regular earnings, according to the complaint.

The complaint says the FTC sent Lyft a letter in 2021 warning the company that it could face civil liability.

“Lyft continued to make misleading earnings claims in its advertisements even after receiving the Notice,” the complaint said.

On the same day, the company agreed to the proposed settlement, saying it does not recognize or deny any claims by the US government.

When asked for comment, a Lyft representative referred Business Insider to a statement on the company’s website.

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“After productive discussions, we agreed to pay the FTC $2.1 million to resolve their concerns. We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve,” the statement said.

The statement cited transparency initiatives launched by Lyft, including “advance payment” introduced in October 2022 and the distribution of a new revenue summary in February “so drivers can see where every cent of the fare is going.”

The settlement requires Lyft to pay a civil penalty of $2.1 million.

“In addition to requiring the company to pay a $2.1 million civil penalty, the proposed settlement also prohibits Lyft from making any revenue claims unless they have substantial evidence to support that claim,” the press release said. FTC release. “Additionally, Lyft will be prohibited from making any hourly earnings claims that include tips as part of the stated hourly amount.”

The settlement states that Lyft must also tell drivers that under the earnings guarantees, they will only receive the difference between their regular earnings and the guaranteed amount.

It also requires Lyft to notify drivers of the settlement.