Lyft agrees to pay $2.1 million penalty after FTC says company made 'deceptive' claims about how much drivers can earn

Lauren Edmonds
Sat, October 26, 2024


The US Department of Justice filed a lawsuit against Lyft on Friday.


The FTC said Lyft made "deceptive" claims about how much money drivers could earn 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 rideshare company violated the Federal Trade Commission Act between April 2021 and June 2022.

The department said Lyft made "deceptive earnings claims" about how much drivers could earn each hour — and in special incentives — in some advertisements.

"Lyft used the hourly earnings calculation at the 80th percentile for a given region. As a result, even relying on Lyft's own calculations, only the top 20% of Drivers — that is, only one in five Drivers — earned the hourly earnings figures quoted in the ads," the complaint said. "For example, in August 2021, Lyft claimed that Drivers in New Jersey could earn up to $34 per hour when Lyft's own calculations put the median earnings at only $25 per 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 were likely to believe that the tips they earned would be additional to the hourly earnings advertised by the company."

Lyft also shared advertisements with "earnings guarantees"

that "misled" drivers into believing they would receive the guaranteed amount as a bonus on top of their ordinary earnings, according to the complaint.

Lyft agreed to a proposed settlement that included a $2.1 million civil penalty. Kelly Sullivan/Getty Images

The complaint said the FTC sent a letter to Lyft in 2021 warning the company that it could be liable for civil penalties.

"Lyft continued to make deceptive earnings claims in its advertisements even after receiving the Notice," the complaint said.

The company agreed to a proposed settlement the same day, saying that it neither admitted nor denied any of the US government's claims.

When asked for a comment, a Lyft representative directed Business Insider toward a statement on the company's website.

"After productive discussions, we have agreed to pay the FTC $2.1 million USD 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 referenced transparency initiatives launched by Lyft, including "upfront pay" introduced in October 2022 and distributing a new earnings summary in February "so drivers can see a breakdown of where every cent of the rider fare goes."

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

"In addition to requiring the company to pay a $2.1 million civil penalty, the proposed settlement also will prohibit Lyft from making any earnings claim unless they have meaningful evidence to back that claim up," the FTC said in a press release. "In addition, Lyft will be prohibited from making any claims about hourly earnings that include tips as part of the stated hourly amount."

The settlement said Lyft must also disclose to drivers that — under its earnings guarantees — they will receive only the difference between their regular earnings and the guaranteed amount.

It also requires Lyft to notify drivers of the settlement.

Business Insider