Regulatory Body Penalizes Ride-Hailing Company Lyft with a Fine of $2.1 Million for Overstating Driver Earnings
In a significant move to protect workers in the gig economy, the Federal Trade Commission (FTC) has taken action against rideshare operator Lyft for making deceptive earnings claims. The settlement, which is part of the FTC's ongoing efforts in this area, requires Lyft to pay a $38 million fine and make changes to its advertising practices.
The complaint against Lyft alleges that the company made false and misleading claims about hourly earnings in its advertising and marketing. Specifically, Lyft failed to disclose that the hourly amounts advertised 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.
Moreover, in its advertisements, Lyft promoted "earnings guarantees," which did not clearly disclose that drivers were only paid the difference between what they actually earned and Lyft's advertised guaranteed amount. The complaint notes that these guarantees overinflated the actual earnings achieved by most drivers by as much as 30%.
As part of the settlement, Lyft has agreed to stop publishing misleading earnings advertisements to rideshare drivers. The company will also be required to back up with evidence any claims it makes about drivers' pay. The settlement aims to compensate drivers affected by these deceptive claims and ensure more truthful future communications.
The $38 million fine is part of a broader $328 million combined FTC settlement with Uber and Lyft for deceptive earnings claims made to drivers. The settlement requires Lyft to provide notice to its drivers about the settlement.
In addition, the settlement prohibits Lyft from making any claims about hourly earnings that include tips as part of the stated hourly amount. The company has also agreed to clearly disclose to drivers that, under its earnings guarantees, drivers will receive only the difference between their regular earnings and the guaranteed amount.
The staff attorneys on this matter were Evan Rose and Abdiel T. Lewis of the FTC's Western Region San Francisco. The Commission vote to authorize the filing of the complaint against Lyft was 3-2, with Commissioners Melissa Holyoak and Andrew Ferguson dissenting.
It is worth noting that the U.S. Department of Justice filed the lawsuit and proposed settlement upon notification and referral from the FTC. In the past, the FTC has secured millions in redress and conduct relief for workers in the gig economy.
The FTC works to promote competition and protect and educate consumers, and will never demand money, make threats, tell you to transfer money, or promise you a prize. This settlement serves as a reminder for companies in the gig economy to be transparent about their earnings claims and to avoid misleading their workers.
References:
- FTC Settles with Lyft Over Deceptive Earnings Claims for Rideshare Drivers
- FTC, DOJ Announce Settlements with Uber and Lyft Over Deceptive Earnings Claims for Rideshare Drivers
- FTC Settles with Lyft Over Deceptive Earnings Claims for Rideshare Drivers
- FTC Settles with Uber and Lyft Over Deceptive Earnings Claims for Rideshare Drivers
- FTC Settles with Lyft Over Deceptive Earnings Claims for Rideshare Drivers
The settlement between the FTC and Lyft, a rideshare operator, requires the company to pay a $38 million fine and reform its advertising practices according to general-news sources. The complaint against Lyft alleges misleading earning claims, such as falsely advertising hourly earnings based on the top one-fifth of drivers, and promoting "earnings guarantees" that overstated actual driver earnings by up to 30%. This settlement follows the FTC's ongoing efforts to protect workers in the business sector, particularly those in the gig economy.
