Lyft Consents to Department of Justice Agreement Regarding Allegations of Misrepresenting Potential Income to Drivers
Lyft Consents to Department of Justice Agreement Regarding Allegations of Misrepresenting Potential Income to Drivers
Lyft has resolved a lawsuit brought forth by the Department of Justice, claiming the company misled drivers about their potential earnings during the pandemic. As a consequence of this settlement, Lyft, the underdog to Uber, will pay a fine of $2.1 million and vow to cease the deceitful tactics mentioned in the lawsuit.
The substance of the lawsuit suggests that between April 2021 and June 22, Lyft advertised potential hourly earnings of $40 in cities such as San Francisco and Boston, and over $30 per hour in cities like Atlanta and Dallas. However, the Department of Justice supposedly discovered that these figures were derived from the earnings of the top 20% of drivers. The majority of drivers, who don't live in their vehicles or take extreme measures to boost their earnings, should not anticipate making this amount. Although not an outright fabrication, the promoted earning potential was not the usual for most drivers in those cities.
Some may argue Lyft did nothing wrong, but the company claims it has already altered its methods since the lawsuit was filed and concluded it was more prudent to settle. "We consented to this settlement because we understand the significance of transparency in preserving trust in the communities we serve," Lyft stated last week.
$2.1 million may not be a substantial sum for a tech company, but Lyft is not faring as well as its competitor these days. While Uber expanded into various additional services such as food and grocery delivery, Lyft primarily stayed with ride-hailing and its micromobility division including CitiBike in NYC. This choice seriously impacted Lyft during the pandemic. Uber's market cap today stands at $153 billion, while Lyft's is simply over $5 billion.
Lyft hired CEO David Risher to try and rejuvenate the company, but the stock has declined by 2% year-to-date.
Uber and Lyft, to a certain extent, have managed to achieve profitability by reducing expenses and, regrettably for riders, enhancing prices. It is true that they can be profitable as they serve as intermediaries, with riders and drivers bearing the brunt of a driver's compensation. These companies lured riders and drivers to their apps with heavy subsidies. Now that it's a daily habit for many, they've decreased the freebies.
Recently, it was revealed in Bloomberg that in NYC, to avoid paying the statutorily mandated minimum wage, Uber has started locking drivers out of the app when demand is low (it mainly needs to pay them directly when they're on the app but not transporting a passenger).
In the realm of tech and future advancements, Lyft has expressed its commitment to improving its transparency practices to maintain trust within the communities it serves. Despite the fine of $2.1 million, the company's strategies for maximizing earnings, such as advertising potential hourly earnings based on top-earning drivers, have significantly impacted the expectations of the majority of its drivers.