Burning Down the House: FTC Accuses HomeAdvisor, Inc. of Deception in Selling Leads for Home Improvement Projects | Venable LLP
On Friday, March 11, the Federal Trade Commission (FTC) filed an administrative complaint against HomeAdvisor, Inc., charging it with using deceptive and misleading tactics to sell leads for home improvement projects to small businesses, including small “gig-economy” workers. The action underscores the current administration’s effort to protect workers, especially those engaged in the gig economy through large platforms.
The FTC alleges that since at least 2014, HomeAdvisor—a popular service that matches service providers with consumers seeking home improvements—made false, misleading, and unsubstantiated claims about the quality and source of leads it sells, and about the likelihood that the leads would result in actual jobs. According to the complaint:
- HomeAdvisor told service providers that the conversion rates at which leads actually resulted in home improvement jobs were higher than what HomeAdvisor’s own data indicated.
- HomeAdvisor represented that the leads it sells reflect consumers who intend to hire a service provider soon, when in reality many consumers do not.
- HomeAdvisor represented that its leads came directly from consumers who seek HomeAdvisor’s assistance in selecting a service provider, even though many leads were also purchased from affiliates.
- HomeAdvisor’s sales agents misrepresented the cost of the optional software subscription offered to HomeAdvisor’s network members that helps with scheduling appointments and processing payments. The FTC alleges that sales agents told service providers that the first month is free with an annual membership package, when really the first month of the subscription is not free.
The FTC purports that the alleged misrepresentations burden service providers with greater time spent on pursuing lower-quality leads believed to be worthwhile, and on seeking refunds from HomeAdvisor for those leads.
The litigation against HomeAdvisor illustrates a growing focus of the FTC on the gig economy and the role of the platforms that sit between the consumers and service providers. FTC Bureau of Consumer Protection Director Samuel Levine emphasized that gig-economy platforms “should not use false claims and phony opportunities to prey on workers and small businesses,” and that this complaint “shows that the FTC will use every tool in its toolbox to combat dishonest commercial practices.” FTC Chair Khan also highlighted the purported potential for market abuse when gig-economy companies engage in misleading earnings claims.
Late last year, the FTC sent notices of penalty offenses to more than 1,100 companies that pitch money-making opportunities—including gig employers and big names like Amazon, Uber, DoorDash, and Lyft—and warned them that the FTC won’t hesitate to target them with civil penalties if they deceive consumers or gig workers about potential earnings.
The increased attention that the gig economy is receiving from the FTC should serve as a wake-up call for technology companies providing matching or aggregating services. In addition to ensuring their consumer-facing ads and apps are transparent, fair, and truthful, these companies must pay attention to how they recruit service providers to join the platform and what representations are made about their potential earned income.