FTC Fines HomeAdvisor Up to $7.2 Million for Lying About Lead Quality and Other Matters
The U.S. Federal Trade Commission has fined home services marketplace HomeAdvisor up to $7.2 million for its use of deceptive and misleading tactics in the sale of home improvement projects to service providers, including including small businesses operating in the gig economy. The fine is the first gig work-related penalty after the FTC announced in the fall of 2022 that it was prepared to crack down on unfair, deceptive, and anti-competitive practices taking place in the gig economy.
Dever-based HomeAdvisor had merged with Angie’s List in 2017 to form a new public company called “Angi”. However, the FTC’s indictment against HomeAdvisor was not issued until March 2022. The Commission said that since at least mid-2014, HomeAdvisor has made unsubstantiated, false, or misleading claims about leads that it sells to service providers, such as general contractors and lawns. care professionals. Specifically, he claimed that the Angil affiliate misrepresented the quality and source of the leads, as well as the likelihood of them leading to actual jobs.
The Commission found that HomeAdvisor informed service providers that its leads were driving home renovations at higher rates than its own data and misled service providers about the cost of its one-month subscription to its platform. The company told service providers that the first month of the mHelpDesk subscription, which helps schedule appointments and process payments, is free with an annual subscription plan. But that wasn’t true, the FTC said. Service providers would end up paying $59.99 more than expected, he noted. (The mHelpDesk program is an optional add-on to the HomeAdvisor Network’s $287.99 annual membership).
Additionally, the FTC found that while HomeAdvisor claims its leads are for consumers who intend to hire a service professional soon, many of them do not. This is partly because HomeAdvisor would resell leads from affiliates who generate leads from online forms that surveyed consumers about potential home projects they were considering. However, the company is said to claim that the leads came from its own website, which suggested that consumers were looking for help from HomeAdvisor.
The FTC’s complaint also said that many leads did not match the types of services offered by the providers or were outside of their preferred geographic area, despite HomeAdvisor’s claims to the contrary.
“Gig-saving platforms must not use false claims and false opportunities to prey on workers and small businesses,” said Samuel Levine, director of the FTC’s Consumer Protection Bureau, at the time of the original FTC order.
The new administrative order also prohibits HomeAdvisor from continuing its deceptive practices and sets up two redress funds to provide money to defrauded service providers. The first fund will pay up to $30 to service providers affected by HomeAdvisor’s misrepresentations about the quality of its leads. Meanwhile, the second fund will make payments of up to $59.99 to service providers who were told that the first month of their mHelpDesk subscription was free. In total, HomeAdvisor must pay up to $7.2 million for repairs, the FTC said.
The Commission voted 4-0 to accept the proposed consent agreement.
This gig economy fine follows other warnings issued by the FTC, including one reminding MLMs (multi-level marketers) not to lie to consumers about potential earnings. This one was sent to 1,100 MLMs, even though they weren’t being investigated. He also reminded these companies that he had previously sued MLMs like Herbalife and Advocare for their high-earnings potential promotions, even though most participants made little or no money. Herbalife settled with the FTC for $200 million and Advocare agreed to pay $150 million. The FTC also settled with Amazon for using misleading income statements to lure drivers to its Flex platform, and sued DeVry University for misrepresentations about the higher incomes graduates received.