The Federal Trade Commission (FTC) has filed an administrative complaint against HomeAdvisor, a company designed to connect homeowners with contractors, stating that since 2014 the company has misrepresented both the source and the quality of its leads to businesses as well as misrepresenting the chances of converting those leads into actual jobs. This resulted in contractors spending their time and money chasing down low-quality leads and contacting people that sometimes weren’t even looking for the service they provided.
According to an article published by Subscription Insider, the leads are priced by their quality, meaning that contractors pay based on the potential of the job related to the services they provide. The article also quotes the HomeAdvisor website as stating that contractors can be credited the cost of leads that aren’t relevant, as well as change their preferences to obtain more useful leads.
The FTC stated that HomeAdvisor is a tool for “gig economy” workers, but was taking advantage of contractors who signed up for the service. “Gig economy platforms should not use false claims and phony opportunities to prey on workers and small businesses,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Today’s administrative complaint against HomeAdvisor shows that the FTC will use every tool in its toolbox to combat dishonest commercial practices.”
According to an article published by Consumer Affairs, the in-house data showed a lower chance of getting jobs through the platform than the company represented to contractors. This resulted in a waste of time for contractors who were following up on leads that the article stated were below the quality promised by HomeAdvisor. Some contractors further had to spend time seeking refunds for these leads.
FTC Alleges a Misrepresentation of Costs
The FTC complaint further alleges that HomeAdvisor’s sales agents misrepresented the cost of the optional one-month HelpDesk subscription by telling service providers that the first month is free with an annual membership package. In reality, continues the allegation, the first month of the subscription is not free but added on to the price of the service, resulting in a package that costs $59.99 more than “properly informed” service providers might have otherwise paid.
Some homeowners have also expressed dissatisfaction with the platform, one of them telling Consumer Affairs that half of the contractors she was put in touch with did not even provide the service she was looking for, wasting her time as well as that of the business she called.
HomeAdvisor Responds
According to the Consumer Affairs article, a spokesperson from Angi, the parent company of HomeAdvisor, states these allegations are without merit and are based on a small number of phone calls.
In an article on PYMNTS.com, the spokesperson promises to “vigorously fight these outrageous allegations.” The statement continued that the company puts its customers first and that the lawsuit shows that the FTC is out of touch with American small business. “Fraud and deception don’t work as business models. If our pros don’t win, we don’t win.”
FTC Hearing Scheduled
The FTC voted 4-0 to issue the complaint, and the organization explains this is not proof of wrongdoing but the beginning of an investigation. “The Commission issues an administrative complaint when it has reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge,” states the FTC.
According to JDSupra, a website that specializes in legal issues, the complaint seeks an injunction that would prohibit HomeAdvisor from continuing to misrepresent its services to home service providers and also notifies HomeAdvisor that the FTC will hold a hearing on this matter on November 9, 2022.
