FTC slaps Lyft with $2.1M fine for luring drivers with false benefits claims

Lyft has agreed to a $2.1 million settlement proposed by the FTC over “misleading wage claims about how much drivers can expect to make.”

As documented in the FTC complaint, Lyft systematically increased the revenue it advertised to drivers it was trying to hire in 2021 and 2022. For example, in LA it has proposed that drivers will be paid up to $43 an hour. “Lyft failed to disclose that these prices did not represent the income an average driver could expect to earn, but rather were based on the income of the top one-fifth of drivers,” and the difference was as much as 30%.

“Lyft said New Jersey drivers can earn up to $34 an hour when Lyft’s statistics put the average wage at just $25 an hour. That same month, Lyft said Boston drivers could earn up to $42 an hour when the average wage was $33 an hour,” the FTC wrote in the complaint.

Not only that, but the advertised hourly rates included tips provided by customers, while suggesting to any casual reader that it was the base rate. So the effective rate is likely to be $5 to $10 lower even than the unquoted rate.

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

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

Although this was clear in the fine print, the language used was misleading, and Lyft received thousands of complaints from its drivers – a group, the FTC points out, made up of people whose English is not their native language.

The FTC warned Lyft in October 2021 that its practices were illegal, and it should stop — but it continued, and the result was this order and sentence.

That’s right, $2.1 million is a drop in the bucket for Lyft, one of the world’s two leading ride-hailing platforms. But the company already has to adjust its payment promises: It can’t include tips in its hourly rates, for example, and it has to more clearly define promotions as “guaranteed” income.

Notably, two FTC Commissioners opposed the decision, saying the agency overstepped the purview of the “finding” language as misleading. But Commissioner Ferguson’s speech, although coherent, is like “consumers know that advertisers exaggerate and lie” and will not take an “earnings” number as representing expected earnings. Perhaps more convincingly, they argue that Lyft was not adequately notified that it was violating the law.

“And workers aren’t protected when the Commission claims they’re winning from questionable legal opinions as it settles complaints for pennies on the dollar with businesses happy to pay the Commission to go away,” Ferguson wrote — a valid point.