ACCC v Trivago N.V. [2020] FCA 16: Trivago Misled Consumers About Room Rates

Wednesday 5 February 2020 @ 3.07 p.m. | Legal Research | Trade & Commerce

In the recent case of ACCC v Trivago N.V. [2020] FCA 16 (20 January 2020), the Federal Court of Australia (“Federal Court”) handed down a decision finding that Trivago N.V. (“Trivago”) breached Australian Consumer Law by misleading consumers about hotel room rates, both on its website and television advertising.

The case (which was brought by the Australian Competition and Consumer Commission) centred around Trivago's television advertisements that ran from December 2016 to July 2018, and on Trivago's website from December 2016 to September 2019. Moshinsky J, noted at [para 2] of the judgment:

“… Trivago engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law”.

Background

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, instead the hotel aggregator promoted its best advertisers.

The Federal Court ruled that from at least December 2016, Trivago misled consumers by representing its website would quickly and easily help users identify the cheapest rates available for a given hotel, when in fact Trivago used an algorithm which placed significant weight on which online hotel booking site paid Trivago the highest cost-per-click fee (“CPC fee”) in determining its website rankings and often did not highlight the cheapest rates for consumers.

In August 2019, the ACCC took the company to court over misleading information on the website and television advertising aired more than 400,000 times from late 2013 to mid-2018.

The Judgment

In handing down his judgment, His Honour said at [para 225]:

“ … Contrary to the impression created by the relevant conduct, the Trivago website did not provide an impartial, objective and transparent price comparison service … The fact that Trivago was being paid by the Online Booking Sites was not made clear. Many consumers would not have appreciated that Trivago was being paid by the Online Booking Sites, let alone that the amount it was being paid was a very significant factor in the selection of the Top Position Offer …”

The Trial

During the trial, each side called two witnesses to express opinions on the algorithm used by Trivago to select the “Top Position Offer”. Trivago's own data showed that in more than 66 percent of listings, higher priced hotel offers were selected as the “Top Position Offer” over alternative lower priced offers.

His Honour found that Trivago had, at [para 242] of the judgment "… engaged in conduct that was misleading and deceptive or likely to mislead or deceive …"

Room Rate Comparisons

The ACCC's media release also reveals Trivago’s hotel room rate comparisons that used strike-through prices or text in different colours gave consumers a false impression of savings because they often compared an offer for a standard room with an offer for a luxury room at the same hotel.

ACCC Chair, Rod Sims said:

“Trivago’s hotel room rate rankings were based primarily on which online hotel booking sites were willing to pay Trivago the most. By prominently displaying a hotel offer in ‘top position’ on its website, Trivago represented that the offer was either the cheapest available offer or had some other extra feature that made it the best offer when this was often not the case.”

Comment and Reaction from the ACCC

Commenting on the outcome of the judgment, Mr Sims said:

“We brought this case because we consider that Trivago’s conduct was particularly egregious. Many consumers may have been tricked by these price displays into thinking they were getting great discounts. In fact, Trivago wasn’t comparing apples with apples when it came to room type for these room rate comparisons … This decision sends a strong message to comparison websites and search engines that if ranking or ordering of results is based or influenced by advertising, they should be upfront and clear with consumers about this so that consumers are not misled.”

The Court also found that, until at least 2 July 2018, Trivago misled consumers to believe that the Trivago website provided an impartial, objective and transparent price comparison for hotel room rates.

According to the Sydney Morning Herald, 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 (known as "the CPC fee") 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.

Comment from Trivago

A spokesperson for Trivago said:

“The judgment received yesterday [20 January 2020] from the court provides new guidance on how results of comparator websites, like trivago and others, should be displayed in Australia. trivago will closely review today’s decision. We are working to quickly understand the implications of this decision on our website design and its overall impact on the Australian travel industry and the way websites are to be designed in Australia. We will continue helping millions of Australians research and find great accommodation deals and look forward to continuing to help our customers find their ideal hotel.”

Where to Next?

The matter will return to the Federal Court for case management at a date yet to be set, the ACCC is seeking orders for penalties, declarations, injunctions and costs.

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