By Matt Bungard
January 21, 2020 —
Hotel comparison website Trivago breached Australian consumer law by misleading consumers on which hotel deals were best, the Australian Federal Court has found.
In a striking victory for Australia’s competition watchdog against the Netherlands-incorporated online giant, the court concluded that Trivago engaged in misleading conduct and made false representations to consumers.
The ACCC had argued Trivago promised customers impartial, objective and transparent hotel price comparisons which would allow them to quickly and easily identify the cheapest offer available. But rather than serving consumers the best deals, the hotel aggregator promoted its best advertisers, the ACCC claimed.
The consumer watchdog took the company to court in August last year over misleading information on the website and television advertising aired more than 400,000 times from late 2013 to mid-2018.
In his judgment, Justice Mark Moshinsky ruled that Trivago contravened several sections of Australian consumer law by claiming it offered the cheapest or “best” prices, while ranking hotels based on advertising dollars, as well as displaying red strike-through text that led consumers to believe it referred to the cheapest available option when it in fact, did not.
The result was that Trivago did not in fact help consumers to identify the cheapest rates available for a hotel room.
An important element of the ACCC’s case concerns the fact that Trivago’s contractual terms require hotel booking sites to pay Trivago a fee, referred to as “cost per click” or CPC, if a consumer clicks on the booking site’s offer through the Trivago website.
The CPC was payable whether or not the consumer made a booking on the hotel booking site’s website and is Trivago’s principal source of revenue.
During the trial, each side called two witnesses. The ACCC called economics professor Robert Slonim from the University of Sydney, and Victor Najanov, an expert on analytics and web algorithms.
Trivago called its own economist, Patrick Smith from RBB Economics, and Professor David Parkes from Harvard.
The company did not call on its own algorithm developers – a move which drew criticism from Norman O’Bryan, SC, representing the ACCC.
Both computer science experts who expressed opinions on the algorithm used by Trivago to select the top offer on a search listing agreed that for roughly two-thirds of listings, higher-priced hotel offers were selected at the top spot over alternative lower-priced offers.
Trivago has been approached for comment. The matter will return to the Federal Court for case management at a date yet to be set.
After enduring that TV advert of a woman misleading everyone by claiming additional savings by booking her hotel though an OTA (Online Travel Agent) every night recently, it is encouraging to read the above judgement.