With the tagline “ Reviews you can trust,” Angie’s List promises to offer “unbiased” customer reviews about service providers. However, a new lawsuit, filed on March 11th by a Pennsylvania woman, claims those reviews are anything but unbiased and that the Indiana-based Angie’s List is nothing more than a fraud. In fact, this complaint cuts right to the heart of the primary selling point of the company—the trustworthiness of consumer reviews. Angie’s List, which currently has more than three million paid members, bases its reputation on providing totally unbiased customer reviews regarding service providers from building contractors to physicians.
Janell Moore, the plaintiff in the case, says she joined the site in 2012, using it to search for a contractor. She eventually chose a contractor listed on Angie’s List who had no reviews. According to Moore, the contractor did not perform the services to a reasonable standard. When she gave a negative review of the contractor, she learned other members had posted negative reviews about the contractor—which had been suppressed. Moore claims service providers like her contractor pay Angie’s List to be pushed up in the ratings, as well as to have negative reviews hidden from other consumers.
According to the complaint filed by Philadelphia based consumer protection lawyers at Golomb Legal, P.C., service providers actually pay Angie’s List to be bumped up the list and receive higher rankings in searches as well as to suppress negative reviews (and ensure positive reviews do show up). Moore’s attorney compares Angie’s List to Yelp, noting the latter does not promote itself as consumer-driven, therefore consumers understand the reviews could come from anywhere. The lawsuit seeks unspecified damages based on fraud, unjust enrichment and other claims.
Angie’s List Seeks Taxpayer Money for Expansion
According to Angie’s List investor relations department, approximately two-thirds of all revenues come from service providers. Advertising is a significant source of revenue for Angie’s List, bringing in much more revenue than subscriptions. In 2014, Angie’s List made $241.9 million from service providers and only $73.1 million from members. Angie’s List is currently seeking $18.5 million in taxpayer assistance from Indianapolis taxpayers in order to expand its current premises. The company plans to add over one thousand jobs as well as to transform the old Ford assembly plant and the city of Indianapolis would spend $9.6 million in tax-increment financing funds to build a parking garage as well as another $6.75 million to relocate a warehouse from the Ford Building.
No Profits for Angie’s List—But Plenty of Negative Publicity
Oddly enough, since Angie’s List was founded in 1995, the company has never turned a profit despite steady growth. Over the past year Angie’s List stock has plummeted and now stands at a mere $5.22 per share. Part of the reason for the declining stocks (as well as the city’s reluctance to help out the company with taxpayer money), is likely due to the fact that this is not the first lawsuit directed at Angie’s List. In 2012, Angie’s List faced a class action suit which claimed higher-than-expected renewal fees were charged to consumers without warning.
The suit, filed by Philadelphia resident Marie Fritzinger, accused the company of systematic and repeated breach of membership agreements. The company settled for $2.8 million. Another class action lawsuit was filed in 2013 which claimed Angie’s List misled shareholders by cutting membership rates in order to artificially inflate the number of subscribers. In 2013, Angie’s List received a round of bad press for accepting paid advertising from the companies they were supposed to publish unbiased reviews about. If Angie’s List receives the money from the city of Indianapolis for expansion, they will put in $40 million of company money to achieve the stated goals. The proposal has been sent back to committee twice, and this latest lawsuit will not make the Angie’s List sales pitch any easier.