The US Federal Trade Commission has fined marketplace for home services Home advisor up to $7.2 million for using misleading and deceptive tactics in selling home improvement projects to service providers, including small businesses operating in the gig economy. The fine is the FTC’s first work-related fine after Fall 2022 Announcement 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 only recently issued March 2022. The Commission said that since at least mid-2014, HomeAdvisor had made unsubstantiated, false or misleading claims about the leads it sells to service providers, such as general contractors and lawn care professionals. Specifically, it alleged that the Angil affiliate had misrepresented the quality and source of leads, and the likelihood that they would result in actual jobs.
The Commission found that HomeAdvisor told service providers its leads resulted in home improvement jobs at higher rates than its own data supported 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, was free with an annual membership package. But this was not true, the FTC said. Service providers would end up paying $59.99 more than they expected, it noted. (The mHelpDesk program is an optional add-on to the $287.99 annual membership to the HomeAdvisor Network).
In addition, the FTC found that while HomeAdvisor claims its leads are for consumers who plan to hire a service professional soon, many of them don’t. This is in part because HomeAdvisor would resell leads from affiliates that generate leads through online forms that asked consumers about potential home projects they were considering. However, the company would claim that the leads came from its own website, suggesting that consumers were seeking HomeAdvisor’s help.
The FTC’s complaint also said that many of the leads did not match the types of services the providers offered or were outside their preferred geographic area, despite HomeAdvisor’s claims to the contrary.
“Gig economy platforms must not use false claims and false opportunities to woo workers and small businesses,” Samuel Levine, director of the FTC’s consumer protection agency, said at the time of the original FTC order.
The new administrative order also bans HomeAdvisor from continuing its deceptive practices and establishes two recovery funds to provide money to scammed service providers. The first fund will make payments of up to $30 to service providers impacted by HomeAdvisor’s lead quality misrepresentation. Meanwhile, the second fund will make payments of up to $59.99 to service providers who were told the first month of their mHelpDesk subscription was free. In total, HomeAdvisor must pay up to $7.2 million for recovery, according to the FTC.
The Commission voted 4 to 0 to accept the proposed consent agreement.
This gig economy fine follows other warnings from the FTC, including a reminder of MLMs (multi-level marketers) to avoid lying to consumers about potential earnings. This has been sent to 1,100 MLMs, even if they were not examined. It too remembered these companies had previously sued MLMs such as Herbalife and Advocare for their promotions of high-earning potential, 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 settled with Amazon also for using misleading revenue claims to lure drivers to its Flex platform, and sued DeVry University for false claims about the higher incomes graduates received.