ACCC finds Trivago guilty of misleading consumers

In a judgment handed down by the Federal Court in January 2020, Trivago, popular hotel comparison website, has been found guilty of misleading and deceiving the public as to the operation of its website. The misrepresentations have led consumers to believe they were obtaining discounts when, in reality, they were not. It has also been revealed that many of the offers shown on the site were ranked based on the fees paid to Trivago, rather than the appropriateness of the offer.

What were the allegations against Trivago?

The Australian Competition and Consumer Commission (‘ACCC’) alleged that from December 2016, across various periods of time, advertisements and web content published by Trivago were misleading and deceptive, in breach of the Australian Consumer Law (‘ACL’).

The ACCC’s case was based upon the following representations made by Trivago:

1. Cheapest Price Representation
   • That searching through Trivago would quickly and easily identify the cheapest rates available for a hotel room.
2. Top Position Representation
   • That offers given top position on searches were given that prominence because they were the lowest price, or offered some other benefit to the consumer.
3. Strike-Through Representation
   • That the strike through comparison was a comparison of prices offered for the same room category in the same hotel.
4. Red Price Representation
   • That the red price was a cheaper offer compared to the same room category in the same hotel.
5. Additional allegations
   • That Trivago gave ordinary consumers the impression that they were an impartial and objective website that would help them easily obtain the best offer for the time they were travelling.

What did the Court find?

The Court found that Trivago had, as alleged by the ACCC, misled and deceived its consumers.

Despite the fact that Trivago had included information on its website which disclosed many of the issues raised by the ACCC, the Court found that the information given was not enough to properly inform consumers of the operation of the Top Position, Cheapest Price, Strike-Through or Red Price Representations. The information given was found to be confusing and, although in some instances it may have disclosed the true nature of the comparative offers, there was still significant misrepresentation about the Top Position Offers.

Top Position Representations

It was disclosed that online booking sites who want their offers displayed on the Trivago website must pay a fee – called a Cost Per Click fee (‘CPC fee’) – each time their offer was clicked on by a consumer. This is payable whether the click results in a booking or not, and is Trivago’s main source of revenue from the web-based application. The CPC fees are not fixed amounts and vary between the various online booking sites who use Trivago.

The ACCC alleged that Trivago used an algorithm which meant that Top Position Offers were determined and ranked according to the value of the CPC fee that Trivago would receive from consumers clicking on that offer – with the highest CPC fees ranking above lower CPC fee offers. Computer science experts were called by the ACCC who agreed that in 66% of listings (during the relevant period), the top listings had higher prices than other similar, lower priced hotels, and although other factors such as price and location were considered in the algorithm, it was apparent that the CPC fee was given more weight in determining Top Position offers.

Red Price, Strike-Through and Cheapest Price Representation

Although consumers believed that they were getting a comparison on prices for rooms in the same category, in fact – they were getting a comparison between the offered room, and a higher priced room in the same hotels. Inevitably, this gave the impression that the price offered was significantly discounted, when in fact, the prices were not actually being compared with a similar product – they were not “like for like”. Consumers, although thinking they were making savings, may not have saved at all.

Additionally, the Court found that over a period of time, the offers that appeared in searches on Trivago were often not the cheapest offers, but (similarly to the Top Position offers) were displayed because Trivago would receive high CPC fees from the offers.

You can access the ACCC’s press release on Trivago here. The Court will hand down judgment as to Trivago’s penalties later this year.

Lessons to be learnt

It is important that any marketing or advertising published for your business is transparent. You cannot make statements that mislead, or are likely to mislead or deceive your consumers, and if you do, you may be liable to pay significant penalties. Small businesses are not immune from complaints and penalties so it is important that you ensure you are compliant.