The Federal Trade Commission (FTC) has initiated action against rideshare company Lyft for allegedly making deceptive claims about driver earnings. The complaint suggests that Lyft misled drivers regarding potential hourly earnings and special incentives.
Lyft has agreed to a proposed settlement, which mandates that its claims about driver pay be based on typical earnings. The settlement also requires Lyft to provide evidence for any pay-related claims, inform drivers about the terms of its "earnings guarantee" offers, and pay a $2.1 million civil penalty.
The U.S. Department of Justice filed the lawsuit and proposed settlement following notification from the FTC. FTC Chair Lina M. Khan stated, "It is illegal to lure workers with misleading claims about how much they will earn on the job." She emphasized that the FTC will continue holding businesses accountable for exploiting workers.
The complaint details that during 2021 and 2022, as demand for rideshare services grew, Lyft made false advertising claims regarding driver earnings. Advertisements suggested specific hourly rates in various cities, such as $33 per hour in Atlanta and up to $43 per hour in Los Angeles. However, these figures were based on top-performing drivers rather than average earnings.
Additionally, the complaint highlights that Lyft's hourly earning claims included passenger tips, leading many drivers to believe tips were additional to their hourly pay. Lyft also promoted "earnings guarantees," which promised a set amount if a certain number of rides were completed within a timeframe. However, these guarantees only covered the difference between actual earnings and the guaranteed amount.
One driver expressed dissatisfaction to the FTC: “…This [is] unacceptable and not fair... [Lyft] should pay their driver[s] as stated."
Despite receiving an FTC Notice of Penalty Offenses regarding unlawful deceptive earnings claims, Lyft continued such practices according to the court complaint.
Beyond financial penalties, the proposed settlement prohibits Lyft from making unsubstantiated earnings claims or including tips in hourly rate statements. It also requires clear disclosure of conditions related to earnings guarantees and notification of drivers about the settlement.
This action aligns with ongoing FTC efforts to safeguard gig economy workers. In previous years, settlements have been reached with Amazon Flex and HomeAdvisor over similar issues involving misleading service providers.
The decision by the Commission to refer this case involved a 3-2 vote with dissenting opinions from Commissioners Melissa Holyoak and Andrew Ferguson. Chair Lina M. Khan's statement was supported by Rebecca Kelly Slaughter and Alvaro M. Bedoya.
The DOJ filed both the complaint and consent decree upon referral from the Commission at U.S. District Court for Northern California.
Evan Rose and Abdiel T. Lewis served as staff attorneys on this matter from the FTC’s Western Region San Francisco office.
The Federal Trade Commission remains committed to promoting competition while protecting consumers through education initiatives.
