If you’re a residential contractor, you’ve probably been solicited by HomeAdvisor, better known as Angi or Angi’s List. HomeAdvisor was back in the news last week. A federal court certified a class of “service providers” authorized to bring suit against HomeAdvisor. If you’ve paid HomeAdvisor for annual membership or leads in the last 20 years, you may have skin in this game. But don’t expect a windfall from the suit. I’ll explain.
Angi’s business is connecting contractors with owners who need home services – “selling leads” in the vernacular. Angi is a big fish in this business – sales of over $100 million a month – with an advertising budget to match. Call centers in 6 states cover the nation. Some home improvement contractors get several calls a month.
HomeAdvisor’s contract includes an annual membership fee (typically several hundred dollars), a fee for each lead (up to $100), a monthly “help desk” charge of $60 and a cancellation charge (as much as 35% of the annual fee). According to the plaintiffs, HomeAdvisor’s “brand promise” is that these leads are from legitimate, real homeowners serious about getting work done. Plaintiffs claim many HomeAdvisor leads had no value: wrong or disconnected phone numbers, wrong contact information, people who never heard of HomeAdvisor, didn’t own a home or completed their project months or even years ago.
According to plaintiffs, HomeAdvisor knew it was deceiving subscribers:
(1)
HomeAdvisor's call tracking system could
connect with only 14% to 30% of leads.
(2)
64% of members tried to stop auto payments
to HomeAdvisor.
(3)
80% of HomeAdvisor members dropped out
annually.
(4)
HomeAdvisor's top management admitted
that many leads were “garbage.”
(5) HomeAdvisor retained profile pages of former members on its website and falsely represented that the member was no longer in business or not accepting new clients.
Under the first four points (“deceptive
practices”), plaintiffs claimed money damages for fraud, presumably at least a partial
refund. For the fifth point (“misappropriation”), plaintiffs asked for an injunction
to stop the practice but no money damages.
The Upshot
The court refused to certify a class for the deceptive practice claims. Fraud statutes in each member’s home-state had to govern any decision. And fraud statutes vary too much from state to state. Claims made about HomeAdvisor sales practice might be fraud in some states and not in others. A class action suit was a poor way to resolve these claims.
The court certified a class for the misappropriation claims. That litigation will go forward. But there won’t be a payout to former members. That’s a big win for HomeAdvisor.
Still, HomeAdvisor has been under pressure to change their sales pitch. Last April, HomeAdvisor reached an agreement with the Federal Trade Commission to refund over $3 million to 110,372 businesses who bought HomeAdvisor memberships. The FTC complaint charged HomeAdvisor with making false, misleading or unsubstantiated claims about the quality and source of their leads. If you signed a HomeAdvisor contract and have a claim number, use this link to apply for a refund. The application deadline is February 24, 2024.
My Advice
HomeAdvisor has plenty of competition: Houzz,
Porch, Thumbtack, Yelp, Bark and Google. Before making any commitment to buy leads, consider the options. No matter the choice, you’ll have to sign the vendor’s “standard
contract”. You can’t write that agreement. But you can draft the contract for any
of your construction projects. Use Construction Contract Writer to draft letter perfect
agreements for any type of work in any state. The trial version is free.
