Thumbtack Price Fixing and Antitrust

Thumbtack has recently started a program that fixes prices for independent contractors outside their firm, called Fixed Price Projects.

A copy of author’s official request that asks the United States Federal Trade Commission, and the United States Department of Justice to investigate Thumbtack operating in an open collusion with thousands of independent home services professionals on the grounds of an alleged violation of the Federal Trade Commission Act of 1914 an alleged violation of the Sherman Antitrust Act of 1890 as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with alleged collusion, false advertising, wire fraud, and price-fixing practices (15 U.S.C. § 1; 15 U.S.C. § 45; 18 U.S.C. § 1343)

Attn: Citizen Complaint Center, Antitrust Division
Department of Justice
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530

Attn: Office of Policy and Coordination, Room CC-5422
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. N.W.
Washington, DC 20580

Please see information about a possible antitrust violation as described below.

What are the names of companies, individuals, or organizations that are involved?

Thumbtack, Inc.
1355 Market Street, Suite 600
San Francisco, CA 94103
support@thumbtack.com
(866) 501–5809

and

Marco Zappacosta
Co-founder & CEO Thumbtack, Inc.
San Francisco, CA

How do you believe they have violated the federal antitrust laws?

According to Thumbtack website, “When you book a job, you’re booking with an independent service professional. Thumbtack does not provide the booked service and is not responsible for the service (except for coverage based on the terms of the Thumbtack Guarantee). Thumbtack is simply facilitating your direct contractual relationship with the independent service professional you are matched with.”

Generally, Thumbtack allows pros to set prices independently, where company claims: “Your pricing is unique, just like the experience you give customers. And how much you charge for your service is up to you. Not all pros price the same, but it’s worth adding prices.”

However, Thumbtack has recently started a program that fixes prices for independent contractors outside their firm called Fixed Price Projects.

“Get matched with a vetted, top-rated pro and pay a fixed price” and “Fixed prices. There’s no need to negotiate prices. You’ll pay a fixed, local price right in the app.” and “Thumbtack’s on-demand bookings conveniently match homeowners with vetted, independent pros in seconds and feature upfront competitive, fixed pricing in a continually expanding list of categories. Think house cleaning, gutter cleaning, junk removal, TV mounting, pest control services, carpet cleaning, window cleaning, roof inspections, pool cleaning, home inspection, and pressure washing.”

Similar price-fixing schemes are currently devised by Amazon Home Services and Handy (HomeAdvisor) that I have previously reported to the DOJ in a separate report.

Amazon Home Services, for example, requires service providers to offer a price set by Amazon even if the consumer contacts the service provider directly. “Pros are required to offer the same price on Amazon as they do if you called them directly,” according to the company’s web site. Such price parity agreement is an active anti-competitive mechanism that provides an online network working as a monopoly to place an exaggerate rake on services of others without the consequence of higher costs to consumers.

Price fixing is a white-collar federal crime in the United States. There is no justification for price fixing — it is always illegal even if the prices set were reasonable to customers. The US Department of Justice and Federal Trade Commission must take action against “Fixed Price Projects” scheme promoted by Thumbtack because platform’s Terms prevent consumers from participating in class action litigation, set limits of Statute of Limitations to one year, and force all users into arbitration. If the government does not prosecute Thumbtack, it is unlikely that consumers will. United States courts have systematically upheld arbitration clauses that force consumers into arbitration on similar cases, such as Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017)

What is the product or service affected by this conduct? Where is the product manufactured or sold, or where is the service provided?

An online marketplace is an arena for competitive dealings. Because legitimate online marketplaces aggregate services and products from a wide array of providers, wider availability and impartial offerings can be offered to consumers as a means to deliver genuine value. All well-managed Internet marketplaces are invaluable elements of a healthy economy. People tend to like excellent online marketplaces because we make products and services much more accessible with an impartial manner. On the other hand, the raked marketplace that engages in price-fixing actively abuse this process by establishing an arena for monopolistic behavior. As a lawful online alternative to competitive dealings in the housing industry, Open Marketplace and market participants are directly harmed by actions of Thumbtack. The primary reason for price-fixing services of independent contractors by Thumbtack is to hide excessive take rake from consumers. This tendency prevents alternative rake-less or lower-raked marketplaces from offering consumers lower prices in competitive setting. If a new marketplace starts to offer consumers lower take rake service, Thumbtack will simply adjust price fixed amount by shifting the cost of operations outside of their firm onto third-party pros, temporarily, or otherwise. In effect, lower prices due to open competition are impossible to offer in such environment. The only way to compete with Thumbtack under such terms is to establish an alternative unlawful price fixing scheme.

What is your role in the situation in question?

I currently operate HomeOpenly.com service. HomeOpenly is an Open Real Estate Marketplace™ designed and built to improve the homeownership experience in the United States. HomeOpenly is a technology company that seeks to implement an Open Marketplace experience for homeowners and service providers as primary means for booking home maintenance, home repair, and similar services locally. HomeOpenly operates subject to a 0% rake as our primary competitive advantage to establish a significantly lower fee schedule than the price-fixed fee schedule for similar services provided by Thumbtack. Our efforts are actively hampered by anti-competitive practices of Thumbtack. With my request to the Department of Justice and the Federal Trade Commission, I am seeking a fair and open competitive environment to develop our service. Successful implementation of an Open Marketplace™ platform requires full enforcement of existing antitrust laws that are enacted to protect US consumers. As long as raked marketplaces are able to price-fix services of independent service providers in exchange for excessive fees, an Open Marketplace™ operates at a competitive disadvantage and suffers damages as a result.

Who is harmed by the alleged violations? How are they harmed?

While prices can be successfully fixed by governments or private monopolies for an overall appearance of savings, such archaic methodology is unable to deliver value, decisively. Economic value is a subjective term, determined freely as an equilibrium between the purchasing power of a buyer and the holding power (desire to sell) of competing service providers.

Price fixing and price parity agreements implemented by the raked marketplaces aim to redefine this pricing equilibrium at the overall cost to impartial free market experience and an aggregate loss of overall value. By utilizing price-fixing and price parity clauses, Thumbtack operates as a raked marketplace that aims to maximize rake revenue, instead of adding value to the overall transaction.

A price-fixing practice is defined by the FTC as an agreement among competitors that raises, lowers, or stabilizes prices or competitive terms. To preserve free market forces in the modern age of online marketplaces, this definition must actively include a new breed of price-fixing agreements made by third parties on behalf of competitors that raises, lowers, or stabilizes prices or competitive terms. This mechanism is also known as “hub-and-spoke” conspiracy. A hub and spoke conspiracy is correctly characterized as an agreement to eliminate competition among the spokes. None of the pros involved with Thumbtack “Fixed Price” scheme compete with one another on pricing.

As long as third parties are allowed to openly set prices for services of others, massively-funded schemes such as Amazon Marketplace, Amazon Home Services, Uber, Lyft, GoPuff, Doordash, Opendoor Brokerage, Redfin Partner Program, etc. will utilize price-fixing and price parity mechanisms to successfully offset inefficiencies that come as a result of setting commission rakes for independent contractors, or small third-party competitors. These schemes set prices outside of their firm in order to offset hard costs of operations and to keep competitors from offering better terms. The only way to compete in “Uberized” economy is to offer an alternative “Uberized” marketplace, where prices are set the by hub against the spokes, and, ultimately, against consumers’ best interests.

Your response to this request carries a decisive outcome of how the next generation of online marketplaces are designed and built to help service the massive economy of the United States.

Today, the question before the FTC and the DOJ is simple: is the United States a price-fixed or a free market economy?

If you continue to observe the former, raked marketplaces such as Thumbtack will happily deliver price-fixed services of independent contractors directly to consumers.

If you are confident in the latter, immediate action is required to re-establish free market forces and to stop price-fixing and price parity practices by raked marketplaces across the United States.

If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice.

Author: Litesand

Antitrust, real estate, e-commerce, fintech, proptech, bigtech

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