FTC Issues Complaint Against HomeAdvisor for Cheating Contractors

The Federal Trade Commission (FTC) issued an official administrative complaint against HomeAdvisor based on allegations of using “deceptive” and “misleading” tactics to sell customer leads to contractors.

An administrative complaint by the FTC means the governmental body has found reason to believe the law is being violated and that a legal proceeding is in the public interest. It marks the beginning of proceedings of a formal hearing.

The FTC alleges HomeAdvisor, an Angi affiliate, has made false, misleading, or unsubstantiated claims about the leads it sells to small business contractors.

These leads are alleged to be of worse quality than the company promised, resulting in contractors wasting time on lower quality leads and, as a result, seeking refunds from HomeAdvisor for those poor leads. Additionally, the complaint alleges HomeAdvisor told contractors that its lead conversion rate was higher than the company’s data supported.

HomeAdvisor’s business model focuses on recruiting contractors to join its network by paying an annual membership fee of $287.99 and also paying a separate fee for every lead received. If a contractor wishes to use HomeAdvisor’s scheduling and payment service, mHelpDesk, it’s another $59.99 a month.

One part of the complaint focuses on the misrepresentation of the mHelpDesk subscription and how sales agents told contractors they would receive the first month free with an annual membership, but they did not.

“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, in the FTC’s release. “Today’s administrative complaint against HomeAdvisor shows that the FTC will use every tool in its toolbox to combat dishonest commercial practices.”

The FTC alleges that HomeAdvisor claims its leads are consumers who intend to hire a service provider soon when the leads do not. Sales agents and marketing materials also misrepresent the source and characteristics of each lead, according to the complaint.

When contractors provide a preferred geographic area and their service type, they often received leads that did not fall into either. Contractors had been promised leads would be consumers using HomeAdvisor to seek a contractor when many leads were purchased from third parties then resold.

The FTC commission voted 4-0 to issue the complaint.