SAN FRANCISCO — Lyft is paying $2.1 million to settle a lawsuit accusing the ride-hailing service of exaggerating how much money drivers could make while the company was trying to recover from a steep downturn in demand during the pandemic.

The agreement resolves a case filed by the U.S. Justice Department a week ago in San Francisco federal court on Oct. 25 — the same day that Lyft disclosed it had negotiated the terms of the settlement revolving around the same issues with the Federal Trade Commission.

Related Story: Uber, Lyft, DoorDash Workers Remain Contractors Due to California Supreme Court ...

Settlement Formalizes Restrictions on Lyft’s Practices

U.S. Magistrate Judge Peter Kang signed an order formalizing the settlement Thursday before it was made publicly available Friday. Besides having to pay $2.1 million, Lyft also has been prohibited from engaging in the misleading practices flagged in the case.

Both the Justice Department and Federal Trade Commission have been investigating Lyft since uncovering evidence that it was advertising inflated compensation rates while trying to to recruit more drivers as the pandemic began to ease and ride-hailing demand perked up.

Allegations of Exaggerated Earnings Claims

The lawsuit alleged Lyft exaggerated the amounts that its drivers could make in a variety of major U.S. cities from April 2021 through June 2022. Lyft advertised drivers could make more than $40 per hour in cities such as San Francisco, Los Angeles and Boston and more than $30 per hour in cities such as Atlanta, Dallas and Miami.

But those figures were based on the earnings among the top 20% of Lyft’s drivers, leaving them unattainable for most others who picked up passengers for the ride-hailing service, the lawsuit alleged. much as $44 per hour in San Francisco.

Related Story: Uber Fined $324 Million by Dutch Watchdog Over Driver Data Protection

Justice Department Emphasizes Enforcement Against Misleading Claims

“The Justice Department will vigorously enforce the law to stop companies from misleading Americans about their potential earnings in the gig economy,” Principal Deputy Assistant Attorney General Brian M. Boynton said in a Friday statement.

Lyft has already changed many of the practices cited in the lawsuit and is now overseen by a CEO, David Risher, who came on board last year.

“We agreed to this settlement because we recognize the importance of transparency in maintaining trust in the communities we serve,” Lyft said last week when it first disclosed the agreement with the Federal Trade Commission.