Lyft Settles With Justice Department Over Allegation It Misled Drivers About Potential Earnings

Lyft has settled a lawsuit filed by the Department of Justice that accused the company of returning drivers to the platform during the violence by misleading them about how much they could earn. As a result of the settlement, the second-fiddle to Uber will pay 2.1 million dollars and promise not to engage in the misleading practices identified in the lawsuit.

The gist of the lawsuit is that—between April 2021 and June 22—Lyft advertised wages of up to $40 an hour in cities including San Francisco and Boston, and more than $30 an hour in cities including Atlanta and Dallas. The Department of Justice says this figure is based on the earnings of the top 20% of drivers. Most drivers, who don’t sleep in their cars or take other measures to increase their income, probably shouldn’t expect to make that much. The advertised earning opportunities were only possible if the drivers hustled hard.

Lyft says that they have changed the way they do things since the lawsuit was filed, but they thought it would be better if they just fix it. “We agreed to this agreement because we recognize the importance of transparency in maintaining trust in the communities we serve,” said Lyft last week.

While $2.1 million isn’t a lot of money for a tech company, Lyft isn’t exactly doing well these days. Once a fierce rival to Uber, its fortunes have taken a turn for the worse over the years. Uber has expanded into a number of additional services including especially food delivery, which turned out to be very beneficial during the crisis when people were not going out but ordering food from home. For now Lyft has largely stuck to ride-hailing and its micromobility divisions including CitiBike in NYC. Uber’s market cap today is $153 billion, while Lyft’s is just over $5 billion.

The company hired CEO David Risher to try to turn things around but the stock is down 2% year to date.

Uber has been able to turn a profit by cutting costs and, much to the chagrin of passengers, raising prices. The old days of $7 across town are long gone now that Uber doesn’t have a real competitor in Lyft and needs to show profitability. And to be sure, it makes sense that Uber would be profitable as it acts as a middle man and puts the burden on the riders for most of their compensation. It was recently reported on Bloomberg that in NYC, to avoid paying the legally mandated minimum wage, Uber has begun locking drivers out of the app when demand is low (essentially it has to pay them only when they’re on the app but not driving a passenger).