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FTC to crack down on ‘unfair, deceptive’ gig company practices

The Federal Trade Commission on Thursday released a statement detailing its intent to crack down on gig companies.

Gig economy companies including rideshare and food delivery apps are coming under fire from the FTC (Photo: Shutterstock)

The Federal Trade Commission is throwing down the gauntlet against gig companies like Uber, Lyft and DoorDash.

The FTC on Thursday released a policy statement that made clear the agency’s commitment to protect gig workers from “unfair, deceptive and anticompetitive practices.” While the statement does not have any legal power, it mentions a laundry list of practices that the FTC is looking to combat, including:

  • Misrepresentations of the flexibility of gig work
  • Diminished bargaining power
  • Reducing competition by exploiting concentrated markets
  • Deceptive or unfair pay practices like misleading pay structures
  • Undisclosed costs or terms of work
  • Unfair or deceptive practices by AI “bosses”
  • Unfair contractual terms, including restrictions on finding other work
  • Wage fixing and coordination to reduce competition
  • Market consolidation and monopolization

Though the statement did not mention any companies by name, there are a few footnotes that might shed some light on the agency’s targets. It cites instances where Amazon, Uber, Grubhub and others have faced legal action involving treatment of their drivers, who are typically classified — or misclassified, depending on who you ask — as independent contractors.

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That means they often are not subject to the same protections and benefits as full-time employees, which has given gig companies the leeway to engage in what many lawmakers and gig drivers have described as unfair practices.

“No matter how gig companies choose to classify them, gig workers are consumers entitled to protection under the laws we enforce,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “We are fully committed to coordinating our consumer protection and competition enforcement efforts within the FTC as well as working with other agencies across the government to ensure gig workers are treated fairly.”

Driver compensation is one of the main issues the commission is looking at. A survey of gig workers mentioned in the FTC’s report revealed that they are often paid low wages, and occasionally even below minimum wage. At the same time, 58% of gig drivers said the money they earned through their job was “essential or important for meeting their basic needs.”

“Gig workers feel the pain of financial struggle daily — they need their money now — so they turn to payday loans until they get paid at the end of the week,” said Tilak Joshi, CEO of Lean Financial, a firm that aims to ease the financial burden on gig workers through methods like cash advances and speedy payouts.

Also mentioned in the report was a survey of ride-hailing and delivery drivers in San Francisco, which found that 30% of the average driver’s income comes from tips. It also took aim at issues like unpaid idle time, unclear communication of earnings and the inflated role of algorithms in assessing payment.

“Technological advances and novel business models are no license to commit unfair, deceptive or anticompetitive practices,” said Elizabeth Wilkins, director of the FTC’s Office of Policy Planning. “We will use all our tools to protect gig workers and promote fair and competitive market practices in the gig economy.”

Watch: Incentivizing the gig economy

The FTC also took time to highlight the massive size of the gig economy and its disproportionate impact on communities of color. Its statement points to a report from the Federal Reserve showing that 16% of Americans have earned money from a gig company. 

The commission went on to highlight that gig economy issues disproportionately impact people of color. An internal agency report found that 30% of Latino adults, 20% of Black adults and 19% of Asian adults reported engaging in gig work, while the figure for white adults was just 12%.

The report said the FTC has already begun rule-making proceedings related to deceptive wages, and it plans to work with other government agencies like the National Labor Relations Board to shore up its policies. But for some, the statement was missing something.

“During today’s meeting, we heard from workers and advocacy groups emphasizing how app-based work provides flexibility and independence that lets millions of people earn additional income on their terms,” Kristin Sharp, chief executive of Flex Association, told MarketWatch. 

Flex is a trade group representing Uber, Lyft, DoorDash, Grubhub, Instacart, Gopuff, HopSkipDrive and Shipt, which is owned by Target. The association was formed in March to “serve as the voice of the app-based economy.”

“What’s missing from the FTC’s policy statement is the perspective of those very workers the agency seeks to protect,” Sharp said.

Justice for App Workers, a New York-based coalition of gig drivers and couriers advocating for living wages and safer working conditions, agreed with the FTC’s renewed emphasis on cracking down against the apps.

“Gig companies are on notice. Workers and regulators alike recognize that the unfair treatment we’re subjected to can no longer continue,” the coalition’s co-founders said in an e-mail statement. “As the FTC highlighted, app workers’ lack of bargaining power has deprived us of the fundamental right to negotiate over wages, benefits, and working conditions.”

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Jack Daleo

Jack Daleo is a staff writer for Flying Magazine covering advanced air mobility, including everything from drones to unmanned aircraft systems to space travel — and a whole lot more. He spent close to two years reporting on drone delivery for FreightWaves, covering the biggest news and developments in the space and connecting with industry executives and experts. Jack is also a basketball aficionado, a frequent traveler and a lover of all things logistics.