Lyft has reached a settlement in a lawsuit brought by the Department of Justice, which accused the company of enticing drivers to return to the platform during the pandemic with misleading information about potential earnings. As part of the settlement, Lyft will pay $2.1 million and has committed to refraining from the deceptive practices outlined in the case.
The lawsuit focused on the period between April 2021 and June 2022, during which Lyft advertised earnings of $40 per hour in cities such as San Francisco and Boston, and over $30 per hour in locations like Atlanta and Dallas. The Justice Department argued that these figures were reflective of the earnings of the top 20% of drivers, implying that most drivers, who did not engage in extensive extra efforts, could not realistically expect to earn that amount. Although the earnings potential was not entirely false, achieving it required significant dedication from drivers.
Lyft has noted that it has already changed its practices following the filing of the lawsuit and determined that settling was in its best interest. The company emphasized its commitment to transparency to maintain community trust, stating, “We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve.”
While the $2.1 million settlement may not be substantial for a technology company, Lyft has faced challenges recently. Having once been a strong competitor to Uber, Lyft’s market position has weakened. Unlike Uber, which diversified into various services, including food delivery, Lyft primarily focused on ride-hailing and its micromobility division, such as CitiBike in New York City. Currently, Uber’s market capitalization stands at $153 billion, compared to Lyft’s $5 billion. Lyft’s CEO, David Risher, has been tasked with revitalizing the company’s fortunes, although the stock has declined 2% year-to-date.
Uber, on the other hand, has become profitable by reducing costs and, despite customer dissatisfaction, raising prices. The former era of inexpensive city rides is largely over, now that Uber faces limited competition from Lyft and aims to sustain profitability. In New York City, Uber has reportedly prevented drivers from accessing the app when demand is low, to avoid paying a legally mandated minimum wage, which applies only when drivers are logged in but not transporting passengers.
