FTC hits Lyft with $2.1M penalty for luring drivers with false earnings claims | TechCrunch

Lyft has agreed to a $2.1 million settlement proposed by the FTC over the car-hailing company’s “deceptive earnings claims about how much money drivers could expect to make.”

As documented in the FTC’s complaint document, Lyft systematically inflated the incomes it advertised to drivers it was attempting to recruit in 2021 and 2022. For instance, in LA it suggested drivers would be offered up to $43 per hour. “Lyft failed to disclose that these amounts did not represent the income an average driver could expect to earn, but instead were based on the earnings of the top one-fifth of drivers,” and the difference was up to 30%.

“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. In the same month, Lyft claimed that Drivers in Boston could earn up to $42 per hour when median earnings were just $33 per hour,” the FTC wrote in the complaint.

Not only that, but the advertised hourly rates were inclusive of customer-provided tips, while implying to any normal reader that it was a base rate. So the effective rate was likely $5 to $10 lower even than the unstated average.

It also made misleading promises about promotions and incentives, according to the FTC.

“For example, one guarantee promised drivers they would make $975 if they completed 45 rides in a weekend. But these guarantees did not clearly disclose that drivers were only paid the difference between what they actually earned, and Lyft’s advertised guaranteed amount,” the FTC said in its press release.

While this was clear in the fine print, the language used was misleading, and Lyft received thousands of complaints from its drivers — a group that, the FTC points out, is composed disproportionately of people for whom English is not their native language.

The FTC warned Lyft in October 2021 that its practices were illegal, and it must stop — but it continued them, and the result is this order and penalty.

Of course, $2.1 million is a drop in the bucket for Lyft, one of the two globally dominant ride-hailing platforms. But the company has already had to shape up its payment promises: It can’t include tips in its estimates of hourly rates, for instance, and it must more clearly explain promotions like “guaranteed” income.

Notably, two FTC Commissioners dissented from the decision, saying that the agency was overstepping in pursuing the “earn up to” language as misleading. But Commissioner Ferguson’s argument, while coherent, amounts to “consumers know that advertisers exaggerate and lie” and would not take the “earn up to” number as representative of expected earnings. Perhaps more convincingly, they argue that Lyft wasn’t adequately notified it was breaking the law.

“Nor are workers protected when the Commission claims victory on dubious legal theories as it settles complaints for pennies on the dollar with businesses that are happy to pay the Commission to go away,” writes Ferguson — a fair point.