We aim to highlight the importance of due diligence in lead campaigns and to keep our customers and industry associates up-to-date with the compliance news reported for our industry. This article is reprinted here for our readers courtesy of our legal partners Mac Murray & Shuster LLP.
FTC Alleges HomeAdvisor Sold False, Misleading, or Unsubstantiated Leads Since 2014
by Nick Whisler
On March 11, the FTC filed an administrative complaint against HomeAdvisor, Inc., alleging they sold false, misleading, or unsubstantiated leads to service providers since at least mid-2014. The FTC asserts that HomeAdvisor’s sales team and marketing materials misrepresented the quality, characteristics, and source of the leads. The Commission’s 4-0 decision to issue the complaint against HomeAdvisor officially begins this proceeding, which may result in a formal hearing.
HomeAdvisor’s platform provides potential customer leads to providers who offer home services like pest management, lawn services, and home security installations. Service providers pay a considerable monthly subscription fee for access to HomeAdvisor’s network.
The FTC alleges HomeAdvisor misrepresented that their leads came from consumers who knowingly solicited HomeAdvisor’s website; however, many were actually purchased from affiliates and were for consumers who did not knowingly seek HomeAdvisor’s assistance. The complaint also asserts HomeAdvisor told service providers the leads would match the particular service and geographical area the service provider expressed, but many were for other services in a different area. HomeAdvisor also allegedly sold leads that misrepresented when consumers intended to hire a service provider, the success rate of lead-to-job maturation, and the price for the first month of subscription.
As we await further action, this case illustrates the importance of due diligence in lead campaigns. Lead generators should ensure that quality and character representations about leads can be substantiated before they make the claim. Lead users should monitor lead standards and seek remedies for patterns of misleading or unsubstantiated leads. Lead buyers and sellers alike should establish compliance and performance warranties and representations in contracts, monitor control factors in lead campaigns closely, perform regular audits of lead claims for proper substantiation, and always ensure the lead comes from the appropriate source, for the appropriate service, and with the consumer’s consent. State and federal regulators are currently giving lead sources significant inquiry, making these tips even more important.