Online ride-hailing company Lyft has agreed to pay $2.1 million to settle allegations it used false advertising to deal with a shortage of drivers when the COVID-19 pandemic began to ease.
The Federal Trade Commission announced the proposed deal Friday after filing a lawsuit that accused San Francisco-based Lyft of engaging in "deceptive practices and acts" to recruit drivers in 2021 and 2022.
"It is illegal to lure workers with misleading claims about how much they will earn on the job," FTC Chair Lina Khan said in a prepared statement.
In the settlement agreement, which still requires court approval, Lyft didn't admit any wrongdoing, but said it would take steps to address the government's allegations.
The FTC said the company "widely disseminated inflated hourly earnings
claims in web search ads, on social media, on internet job boards, and on Lyft's website."
The ads included one that said, "Start driving and earn up to $44/hour," even though the amounts were based on the earnings of the company's top 20% of drivers, according to court papers filed in U.S. District in San Francisco.
Lyft also allegedly touted "earnings guarantees" that duped drivers into believing they would receive bonuses of up to $2,200 when the offer only covered difference between their actual earnings and the guaranteed amount.
Those promotions led to tens of thousands of complaints from Lyft's drivers, who are treated as independent contractors and have to supply their own vehicles and pay for gas, maintenance and other costs, according to the FTC.
Lyft's actions were allegedly prompted by what it internally called a "supply crunch" for drivers when demand for the company's service surged due to the widespread availability of COVID-19 vaccines.
Lyft's stock price fell 2.7% on Friday, to $13.41 a share.
