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Trivago cops $44.7 million in penalties for misleading consumers over hotel room pricing: Australian Competition and Consumer Commission v Trivago N.V. (No 2) [2022] FCA 417

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The Federal Court has ordered Trivago to pay $44.7 million in penalties for making misleading representations about hotel room rates in television advertising and on its website, following proceedings brought by the ACCC. The Court’s decision in Australian Competition and Consumer Commission v Trivago N.V. (No 2) [2022] FCA 417 indicates online businesses will be heavily penalised for serious breaches of the Australian Consumer Law, particularly where many consumers suffer loss and damage because of the offending conduct.

Factual Background

The respondent, Trivago, provides an online search and price comparison platform for travel accommodation in Australia. The proceedings relate to the ACCC’s allegations that Trivago contravened sections 18, 29 and 34 of the Australian Consumer Law from 1 December 2016 to 13 September 2019. During this period, Trivago ran a television advertising campaign with ads containing statements to the effect that Trivago makes it easy “to find the ideal hotel for the best price.” At the same time, the Trivago website had the statement: “Find your ideal hotel for the best price.”

However, the price that Trivago featured as the “Top Position Offer” was most often not the cheapest offer for a given hotel room, considering:

  1. The Trivago website only showed offers made by Online Booking Sites that had agreed to pay a certain amount of money known as the Cost Per Click (“CPC“) to Trivago.
  2. Unless the CPC exceeded a minimum threshold set by Trivago, the offer did not appear on the Trivago website.
  3. Trivago used an algorithm known as the “Top Position algorithm” to select the offer to appear as the “Top Position offer”. A key factor in deciding which offer would be the Top Position Offer was the amount of CPC paid by the Online Booking Site to Trivago.

 

Federal Court Proceedings on Liability

On 20 January 2020, Justice Moshinsky in the Federal Court determined Trivago’s liability in proceedings brought by the ACCC. His Honour found that Trivago had breached sections 18, 29 and 34 of the Australian Consumer Law. It did this by misleading consumers in representing that its website would help users identify the best hotel deal or cheapest hotel rates when, in fact, the Trivago website only displayed offers if the Online Booking Site’s CPC bid exceeded a minimum threshold.

Justice Moshinsky also found Trivago misled consumers by using “strike-through” price comparisons. This involved listing the hotel room’s full price with a “strike through” to show a price reduction. His Honour found this practice gave consumers the false impression that Trivago’s rates offered a saving, when in fact they generally compared a standard room with a luxury room at the same hotel. On 4 November 2020, the Full Federal Court dismissed an appeal by Trivago against this decision.

Federal Court Decision on Penalties

On 22 April 2022, the matter came before Justice Moshinsky again to determine pecuniary penalties for Trivago’s contraventions of sections 29(1)(i) and 34 of the Australian Consumer Law.

Relevant considerations for setting the penalty amount included:

  • The serious nature of Trivago’s conduct, with its television and website advertising being highly misleading and affecting many consumers. Over the 2016 to 2019 period, there were approximately 111 million click-outs on the Trivago website, and most were on the Top Position Offer. In addition, Trivago derived at least $53 million from the contravening conduct.
  • The loss to consumers due to Trivago’s contraventions was $30 million. In nearly all cases, his Honour found the consumer would not have clicked-out on the Top Position Offer and made the booking if they had known it was not the cheapest offer.
  • Trivago had belatedly taken some steps to ensure compliance with Australian consumer laws and co-operated with the ACCC to some extent for the purposes of the relief hearing.

 

Considering these factors, Justice Moshinsky ordered Trivago to pay penalties amounting to $44.7 million to reflect the seriousness of the contraventions. The Court also made a restraining order that for five years Trivago not display as “Top Deals” a price offer that was not the cheapest available or which had some other trait that made it more attractive than any other available for the hotel.

So what?

Trivago’s actions have harmed their reputation, consumers, and competitors. It is likely the ACCC will be encouraged to pursue similar high-profile cases that will attract significant penalties and industry attention. The proceedings also provide guidance as to how websites advertising accommodation from providers should display recommendations.

The Court’s decision in the initial liability proceedings indicates businesses should take care to ensure advertised prices for goods or services are transparent. There should also be good justification for advertising a price as the “best price” or “cheapest price”. Otherwise, businesses risk a substantial penalty that is proportionate to the harm caused to consumers and competitors.

Contributors

Kaitlyn Oliver
Law Graduate

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