Lyft has agreed to pay a hefty $2.1 million settlement after the Federal Trade Commission (FTC) accused the car-hailing company of deceiving drivers with false earnings claims. The FTC found that Lyft had been inflating the potential earnings it advertised to drivers in an effort to recruit them. For example, in Los Angeles, Lyft claimed that drivers could make up to $43 per hour, failing to disclose that this amount was only achievable by the top 20% of drivers and not the average driver.
In New Jersey, Lyft advertised that drivers could earn up to $34 per hour, while the actual median earnings were only $25 per hour. Similarly, in Boston, where Lyft claimed drivers could make up to $42 per hour, the median earnings were just $33 per hour. These misleading claims misled drivers into thinking they could make more money than they actually could.
Moreover, Lyft’s advertised hourly rates included customer-provided tips, making the effective rate lower than what was implied. The company also made false promises about promotions and incentives, such as guaranteeing drivers $975 if they completed 45 rides in a weekend. However, drivers were only paid the difference between their actual earnings and the guaranteed amount, which was not clearly disclosed.
Despite warnings from the FTC in October 2021 to stop these deceptive practices, Lyft continued with them, leading to this hefty fine. While $2.1 million may not be a significant amount for Lyft, it serves as a warning to the company to be more transparent in its dealings with drivers.
The FTC Commissioners were divided on the decision, with two dissenting from pursuing the “earn up to” language as misleading. They argued that consumers are aware that advertisers exaggerate and may not take these claims at face value. However, Commissioner Ferguson raised concerns about the lack of adequate notification to Lyft about breaking the law and the need for stronger protection of workers in such cases.
In conclusion, this settlement highlights the importance of companies being truthful and transparent in their advertising and recruitment practices. It also serves as a reminder to regulators to ensure that businesses are held accountable for deceptive practices, especially when it comes to vulnerable groups like non-native English speaking drivers.
