A few years ago, a former employee of Angie's List shared with me some rather startling stories about how the company conducts its membership-based consumer rating service and likened it to an extortion racket. The former employee said the ratings of service providers relied upon by the company's consumer members were largely bogus because good service ratings were driven more by advertising dollars paid by the service providers being rated than actual consumer reviews of the businesses by the company's paid members. The former employee even suggested that employees of Angie's List would write bogus positive ratings to service providers which advertised with the company, and write negative reviews of companies which did not advertise with the company. In the case of the latter, the former employee said the company would make the negative ratings go away if the service provider plopped down money and started advertising on Angie's List. What the employee described was, in effect, a high-tech form of the protection rackets crime families ran across major cities in this country for decades.
During public testimony concerning a proposal before the Indianapolis City-County Council to provide $18.5 million in public subsidies to Angie's List, which is in addition to the more than $14 million the company received from the state and city just a few years ago, Democratic mayoral candidate Larry Vaughn described Angie's List as a company that sells bumper stickers and syndicates on the side in a way that crushes many small business owners in this city and elsewhere. A new class action lawsuit filed this month in the federal district for the Eastern District of Pennsylvania lays out detailed allegations which confirm, for the most part, the damning claims related to me by the former employee and Vaughn's depiction of the company in urging council members to deny any additional public subsidies to the company, which has never turned a profit in its nearly two decades of existence, perhaps one of the view things differentiating it from the protection rackets run by organized crime syndicates.
According to the class action lawsuit, Angie's List does not provide the unfiltered, consumer-driven rating service it sells to its consumer members. Instead, Angie's List manipulates service providers' reviews, ratings and search result rankings based on advertising fees paid by the services providers, which can run into the tens of thousands of dollars. How does Angie's List manipulate its ratings? The lawsuit lays out three basic scenarios:
- A service provider shows up higher in search results on its search engine based on whether a service provider pays to advertise on its site, not based upon actual consumer reviews. The lawsuit says this has the practical effect of duping its members to choose a service provider listed higher on its search engine result
- Angie's List suppresses negative reviews of service providers who pay to advertise on the site by either not counting a company's negative reviews in its overall rating behind the interface its members see, or by making negative reviews of a service provider not readable by its members.
- Finally, Angie's List threatens to suppress positive reviews of service providers if the provider refuses to purchase advertising from the company.