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FTC Charges HomeAdvisor, Inc. with Cheating Businesses, Including Small Businesses, Seeking Leads for Home Improvement Projects

The Federal Trade Commission today issued an administrative complaint against Denver-based HomeAdvisor, Inc. – a company affiliated with Angi – alleging it used a wide range of deceptive and misleading tactics in selling home improvement project leads to service providers, including small businesspeople operating in the “gig” economy.

The FTC’s complaint against HomeAdvisor alleges that since at least the middle of 2014 it has made false, misleading, or unsubstantiated claims about the quality and source of the leads the company sells to service providers, such as general contractors and small lawn care businesses, who are in search of potential customers.

“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.”

For example, HomeAdvisor told service providers that its leads resulted in actual home improvement jobs at rates higher than HomeAdvisor’s own data supported. HomeAdvisor also misled service providers about the cost of an optional one-month subscription to a software platform that HomeAdvisor sold along with its leads, according to the FTC’s complaint.

As a result of these misrepresentations, the complaint alleges, service providers often spend time following up on leads that are below the quality HomeAdvisor promises, and even more time seeking refunds from the company for those leads.

HomeAdvisor, which also does business as Angi Leads and HomeAdvisor Powered by Angi, recruits service providers using marketing materials and agents who call the service providers and try to persuade them to join the company’s network. Once service providers join HomeAdvisor’s network, HomeAdvisor then sells them leads, which service providers use to contact potential customers for home services like kitchen remodeling or lawn care.

Many of the leads HomeAdvisor sells consist of information submitted by consumers on the company’s website. It also resells leads it buys from third parties, known as affiliates, who generate the leads, in part, from web-based forms that ask consumers about potential home projects they are considering.

Service providers who join HomeAdvisor’s network pay an annual membership fee of $287.99, in addition to a separate fee for each lead they receive. 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.

This brings the total subscription fee to $347.98, with the mHelpDesk program automatically renewing at $59.99 per month until it is canceled. According to the complaint, HomeAdvisor’s sales agents and marketing materials have misrepresented the quality, characteristics, and source of the leads the company provides. First, while HomeAdvisor states that its leads concern consumers who intend to hire a service provider soon, many of them do not, the FTC contends.

In addition, while HomeAdvisor represents that services providers only will receive leads matching the types of services they provide and their preferred geographic area, many of them do not. HomeAdvisor also represents to service providers that its leads are from consumers who knowingly sought HomeAdvisor’s assistance in selecting a service provider, while many of the leads it sells are actually purchased from affiliates and did not come from HomeAdvisor’s website.

The complaint also alleges HomeAdvisor often tells service providers that its leads result in jobs at rates much higher than it can substantiate.

Finally, the complaint alleges that HomeAdvisor’s sales agents misrepresented the cost of the optional one-month mHelpDesk subscription by telling service providers that the first month is free with an annual membership package. In reality, the first month of the subscription is not free, resulting in a package that costs $59.99 more than properly informed service providers might have otherwise paid.

The Commission vote to issue the complaint was 4-0. 

NOTE: 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.