When COVID vaccines started becoming widely available in early 2021 and demand for ride-hailing services began to recover, Bay Area company Lyft launched a nationwide campaign to recruit drivers with promises of lucrative pay.
“Start driving and earn up to $44/hour,” said an online Lyft ad targeting San Francisco, while another ad focused on Los Angeles touted “up to $43.” Other promotions indicated hourly pay of up to $31 in Miami and Dallas, up to $33 in Atlanta and up to $42 in Boston.
But, according to the U.S. Department of Justice and the Federal Trade Commission, Lyft inflated the potential pay for drivers in such ads, in internet-search responses, and in posts on internet job boards, on Craigslist, and on its website.
Only one out of five drivers made the kind of money Lyft was promising, the agencies said in a lawsuit filed Oct. 25 in San Francisco U.S. District Court.
“Lyft’s deceptive hourly earnings claims were typically preceded with the phrase ‘up to,’ ” the lawsuit says. “Many consumers were unlikely to notice the phrase or understand that it meant that typical driver earnings would be significantly less. The hourly earnings figure was more likely to draw their attention.”
Now the ride-hailing giant has been hit with a $2.1 million fine over the misleading claims.
The company did not respond to requests for comment Tuesday.
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Lyft also made some wage claims on job boards without using ‘up to,’ ” the lawsuit said.
Would-be drivers were unlikely to read or understand the small print accompanying the ads, which clarified that the promised wages were “not indicative of any specific driver’s earnings,” the lawsuit says.
The deceptive ads worked, according to the lawsuit, with Lyft’s internal analysis reporting a 24% increase in leads for new drivers, with the best results via job boards and social media.
Lyft also ran misleading “earnings guarantee” ads that led many drivers to confuse the guaranteed amount for bonuses, the lawsuit says.
In October 2021, the Federal Trade Commission told Lyft its pay promises broke federal law, but the company continued to “make deceptive earnings claims,” the lawsuit said. The company only stopped after the FTC served Lyft with an investigative demand in March 2022, seeking documents and information about earnings claims in ads, the lawsuit says.
On Friday in San Francisco U.S. District Court, Lyft was ordered to pay a $2.1 million fine by Judge Peter Kang, who said the federal agencies’ claims would be considered as fact in any future legal actions around the case.
Kang also banned Lyft from making misleading earnings claims. Any claims about drivers’ potential pay must be backed up by “reliable evidence” that they are true, and apply to the people to whom the claims are made, Kang ordered.
Lyft, according to Kang’s ruling, did not admit to, or deny, the agencies’ allegations.