Angie’s List, now known as Angi, has long been a household name connecting consumers with home service professionals. However, the company recently found itself in hot water with the Federal Trade Commission (FTC). This article delves into the reasons behind Angi’s troubles, exploring the deceptive practices that led to a proposed order requiring them to pay up to $7.2 million.
The FTC’s proposed order targets HomeAdvisor, Inc., a company affiliated with Angi, for employing a range of misleading tactics in selling home improvement project leads. These leads are marketed to service providers, many of whom are small businesses and gig economy workers. The core issue revolves around allegations that HomeAdvisor deceived these service providers about the quality and source of the leads they were purchasing.
According to the FTC complaint, HomeAdvisor engaged in deceptive conduct for several years. The company is accused of making false or unsubstantiated claims regarding the leads they sold. For example, HomeAdvisor allegedly misrepresented that service providers would only receive leads that matched their specific services and geographic preferences. In reality, many service providers received leads that were irrelevant to their business, wasting their time and money.
Furthermore, the FTC complaint states that HomeAdvisor overstated the conversion rates of their leads. Service providers were allegedly led to believe that a much higher percentage of leads would translate into actual paying jobs than was actually the case. This inflated sense of potential business likely encouraged service providers to invest in HomeAdvisor’s services, only to be disappointed by the results.
Another deceptive practice highlighted by the FTC involves mHelpDesk, an optional subscription service offered by HomeAdvisor. Sales agents allegedly misrepresented to service providers that the first month of the mHelpDesk subscription, priced at $59.99, was free. This hidden cost further added to the financial burden on service providers who were already struggling with low-quality leads.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, emphasized the agency’s commitment to combating dishonest commercial practices, even in the evolving gig economy. This action against HomeAdvisor is the first announced since the FTC issued its Policy Statement on Enforcement Related to Gig Work, signaling a clear intent to protect gig workers and small businesses from unfair and deceptive practices. This policy statement underscores that established consumer protection and competition principles fully apply to gig companies.
The FTC’s action against HomeAdvisor is not isolated. It builds upon previous efforts to safeguard gig workers and small businesses, including the Notice of Penalty Offenses on Money-Making Opportunities and the ANPR on Earnings Claims. These initiatives collectively demonstrate a growing regulatory focus on ensuring fair practices within the gig economy and protecting those who rely on such platforms for income.
HomeAdvisor, operating under names like Angi Leads and HomeAdvisor Powered by Angi, recruits service providers across various home service sectors, from general contractors to lawn care businesses. These providers join HomeAdvisor’s network and pay an annual membership fee, along with separate fees for each lead they receive. The business model hinges on connecting service providers with potential customers seeking home repair and maintenance projects. However, the FTC alleges that HomeAdvisor exploited this model through deceptive tactics, undermining the very service it purported to offer.
The proposed FTC order not only mandates a significant financial remedy but also includes provisions to prevent future misconduct. HomeAdvisor is prohibited from making false or misleading claims about their leads, including assertions about customer readiness to hire or the direct sourcing of leads. The order also bars them from misrepresenting products as free and from making unsubstantiated claims about lead conversion rates.
The redress program established by the FTC order includes two funds. One fund will compensate service providers for losses incurred due to misrepresentations about lead quality, with payments up to $30. The second fund will specifically address the mHelpDesk misrepresentation, providing payments up to $59.99 to those who were wrongly charged for the first month.
The FTC’s proposed consent agreement, accepted by a 4-0 vote, is now subject to public comment before a final decision is made. This case serves as a stark reminder to businesses operating in the lead generation space, particularly those targeting gig workers and small businesses, that deceptive practices will not be tolerated. For Angi and HomeAdvisor, navigating these legal challenges and restoring trust with service providers will be crucial for their future success.
