HomeAdvisor - alias Angie's List - Faces $7 Million Penalty
It’s been said that you can only sell your credibility one time. If that’s true, HomeAdvisor, Inc., may find it more difficult to get new clients. The clients in this case are not consumers but the contractors and handymen who pay the company to provide them with lists of supposed would-be customers.
Like many of the newer “pro-consumer” sites, HomeAdvisor is free to the consumer. Instead, it makes its money from the businesses that pay it for leads. But the Federal Trade Commission says that in too many cases, the leads aren’t worth the price of admission.
The FTC wants the company, once known as “Angie’s List,” to pay up to $7.2 million for using deceptive and misleading tactics to sell home improvement project leads to service providers, including small businesses operating in the “gig” economy.
The FTC’s proposed order also sets up two redress funds to provide money to defrauded service providers.
“Today’s order requires HomeAdvisor to refund home service providers millions of dollars and stop misleading them about the quality of its leads,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Even as the nature of work and the economy change, the FTC will continue to combat dishonest commercial practices aimed at consumers, workers, and small businesses.”
Pay to play price: $287.99
HomeAdvisor, which also does business as Angi Leads and HomeAdvisor Powered by Angi, recruits service providers, such as general contractors and lawn care businesses, to join the company’s network. Once service providers pay up, HomeAdvisor sells them leads, which the service providers use to contact potential customers for home repair and maintenance projects.
Service providers who join HomeAdvisor’s network generally pay an annual membership fee of $287.99, in addition to a separate fee for each lead they receive, the FTC said. As part of their HomeAdvisor membership package, many service providers have also paid an additional $59.99 for an optional one-month subscription to a service called mHelpDesk, which includes software that helps with scheduling appointments and processing payments.
The FTC’s March 2022 administrative complaint against HomeAdvisor charged that since at least mid-2014 it has made false, misleading, or unsubstantiated claims about the quality and source of the leads the company sells to service providers who are in search of potential customers. For example, the complaint alleged that, while HomeAdvisor has represented that service providers only will receive leads matching the types of services they provide and their preferred geographic area, many of them do not.
“Free help” wasn’t free
The complaint also alleged that HomeAdvisor often tells service providers that its leads result in jobs at rates much higher than it can substantiate. Finally, the complaint alleged that HomeAdvisor’s sales agents misrepresented that the optional one-month mHelpDesk subscription was free.
In addition to requiring that HomeAdvisor pay up to $7.2 million for redress, the proposed order prohibits the company from making any false or misleading claims regarding its leads, including that they concern individuals who are ready to hire a service provider or who submitted a request for home services directly to HomeAdvisor. It also bars HomeAdvisor from misrepresenting its products as free when they are not, or making unsubstantiated claims about the rate at which its leads convert into paying jobs.
The redress program included in the order would administer two separate funds. The first would make payments of up to $30 to service providers affected by HomeAdvisor’s misrepresentations about its lead quality. The second would make payments of up to $59.99 to service providers who were told that the first month of their mHelpDesk subscription was free.
Today’s action is the first announced since the Commission issued its Policy Statement on Enforcement Related to Gig Work, which committed the agency to rooting out unfair, deceptive, or anticompetitive practices in the gig economy.