Lawsuit accuses Angie's List of manipulating reviews

With a critical vote on a tax-incentive package looming, Indianapolis-based Angie's List has been hit with another class-action lawsuit, the company's third in four years.

And unlike past allegations, this complaint cuts to the heart of the company's chief selling point: the trustworthiness of its consumer reviews.

Filed March 11 in U.S. District Court in Philadelphia, the lawsuit alleges that Angie's, an online consumer review service, manipulates company ratings that are sold to its subscribers as impartial user reviews.

It does so, the lawsuit claims, by giving paid advertisers preferential treatment, such as boosting their visibility on the site and suppressing negative reviews.

"Angie's List does not help members find the 'best' service provider, but rather the one who paid the most money to Angie's List," the complaint says. "This certainly is not 'always placing the interests of the consumer first,' " as the company says in its public filings.

Debra DeCourcy, an Angie's spokeswoman, said it is company policy not to comment on pending litigation. The company's lawyers have not yet filed a response in court.

The lawsuit was brought by Pennsylvania resident Janell Moore, an Angie's member since 2012, according to court documents. Moore says she relied on Angie's reviews in 2014 to hire a remodeling contractor who didn't finish the work and refused to refund her $4,000.

According to the lawsuit, when she tried to file a negative review, she learned from an Angie's employee that other subscribers had given the contractor bad reviews as well — only they didn't show up on the site. The suit claims that's because Angie's suppresses bad reviews of paid advertisers by hiding them or not counting them toward the companies' A-F rating.

Advertising has become a substantial source of revenue for the company, dwarfing that of subscriptions, according to its annual reports. The company made $241.9 million from service providers in 2014 vs. $73.1 million from members.

The lawsuit comes at a critical juncture for Angie's, as it seeks $18.5 million in taxpayer assistance to expand its headquarters on the Near Eastside. City-County Council members in both parties have expressed support for the project, while acknowledging that many of their constituents remain deeply skeptical of giving the company public assistance.

The proposal has been sent back to committee twice, and the latest lawsuit won't make the company's sales pitch any easier. Critics point to the fact that Angie's has never turned a profit and has been sued repeatedly over questionable business practices. In 2012, separate lawsuits accused the company of charging members inflated renewal fees without warning, and of misleading shareholders.

Angie's officials insist the company's financial position is strong, pointing to steady growth in jobs, subscribers and revenue.

During public hearings, Angie's officials have assured council members that none of the pending lawsuits would affect the company's ability to create the 1,000 jobs required under the proposed tax-incentive agreement. The tax incentives are up for a vote March 30.

Philadelphia law firm Golomb & Honik is representing Moore in the class action case.

Call Star reporter Brian Eason at (317) 444-6129. Follow him on Twitter: @brianeason.