Hotel price-comparison website ‘Trivago’ found to have misled consumers
Price-comparison and booking websites are increasingly attracting the attention of competition and consumer law regulators globally, proving to be a fertile breeding ground for fair trading and competition law issues.
In January 2020, the Federal Court of Australia held that accommodation price-comparison website Trivago to be in breach of the Australian Consumer Law (which contains provisions similar to New Zealand’s Fair Trading Act), for misleading consumers and making false representations as to which hotel deals were the best for customers. This article outlines the Federal Court of Australia’s findings in the Trivago case and explores some of the concerns that that the Trivago decision highlights regarding the operation of price-comparison and booking websites.
The Trivago decision
In mid-2018, the Australian Competition and Consumer Commission (ACCC) initiated legal proceedings against the operator of accommodation price-comparison website Trivago under the Australian Consumer Law, alleging that the website had misled consumers as to the best available room-rates. The Trivago website aggregated accommodation offers made by online booking sites and proprietors’ own websites, highlighting one offer prominently. The Trivago website was advertised through various mediums, including television advertisements that claimed that Trivago helps “find your ideal hotel at the best price.”
The Federal Court of Australia agreed with the ACCC’s assertion that the Trivago misled customers into believing that the prominently displayed price offer on the website was the cheapest available rate, when this was not in fact correct. Astoundingly, Trivago’s own data showed that higher-priced room rates were selected to be the most prominently displayed offer, over alternative lower-priced offers, in 66.8% of cases. Trivago primarily sourced its revenue from cost-per-click payments from online hotel booking sites. The Trivago website gave certain search results prominence so as to increase Trivago’s likely revenue from these payments.
The Federal Court of Australia found that Trivago misled customers by representing that the website would quickly and easily help consumers find the cheapest rates, when in fact the website used an algorithm which placed significant weight on which booking site or accommodation operator paid Trivago the highest cost-per-click when determining how sites were ranked on the website.
Furthermore, Trivago also used strike-through prices in different colours to rate comparisons, but this would often compare a standard room to a luxury room at the same hotel, which was held to give consumers a false impression of savings. The ACCC considered the behaviour to be “particularly egregious” as “many consumers may have been tricked by these price displays into thinking that they were getting great discounts.”
Price-comparison and booking websites
The accuracy of information displayed on price-comparison and booking websites has been an ongoing challenge for competition and consumer law regulators.
In New Zealand in 2017, Lane Neave assisted clients to lodge complaints with the Commerce Commission regarding the travel review website Rankers.
The Commerce Commission investigated and concluded that representations made on the Rankers website were likely to be false and misleading, in breach of the Fair Trading Act. Specifically, the Rankers website claimed that the traveller reviews displayed on the website were independent, impartial and free of any bias. However, it was found that Rankers were played a role in determining which campervan companies’ appeared in the ranking tables on the website, including excluding companies that did not pay commissions to Rankers for bookings. The Commission stated in their warning to Rankers that the website should have been clear about the commercial relationship Rankers had with some of the campervan companies displayed, and how the relationships impacted who appeared on the ranking table.
Formal warnings have also been issued by overseas regulators regarding price-comparison and booking websites engaging in misleading and deceptive conduct. Last year, the United Kingdom’s Competition and Markets Authority (CMA) issued warnings to six online booking websites, after the sites were found to be making misleading discount claims as well as using pressure-selling (such as “one room left” warnings) and including hidden charges.
The American Federal Trade Commission (FTC) has also expressed a strong interest in protecting consumers who purchase hotel and travel services online. In July 2017 the FTC released a report on this issue, which expressed particular concern about the lack of transparency as to whether a customer was purchasing accommodation from a hotel directly or through a third party. Shortly after the FTC’s report was released, the FTC entered into a settlement with third-party hotel room reseller ‘Reservation Counter’ with respect to allegations that Reservation Counter had incorrectly led consumers to believe they were reserving their accommodation directly with hotels, as well as a lack of transparency about credit card charges. Under the terms of the FTC settlement, Reservation Counter was prohibited from making misrepresentations about affiliations with hotels and was instructed to disclose material information about the cost of the room and other charges.
What next for New Zealand?
Following the release of the Trivago decision, there have been calls for the New Zealand Commerce Commission to investigate and take action against price-comparison websites if they are found to be in breach of the Fair Trading Act 1986. The Commission has received 18 complaints about Trivago since 2015, and one investigation has been carried out, but so far the Commission has not taken it further with enforcement action. The Commission has stated that it will not be investigating Trivago following the Federal Court’s decision, however it will be liaising with the ACCC to ensure that any changes made by Trivago in Australia are also made in New Zealand.
Significantly, the Federal Court of Australia’s findings in the Trivago case send a strong message that where third party websites enable consumers to compare different businesses, the search results given by the third party must not be misleading or deceptive to the consumer. Such websites must be upfront and clear as to how they order their results, and with regards to their level of independence, at all times.
If you would like to know more about the Trivago decision, or have concerns as to whether a third party booking and review website is operating in a legally compliant matter, please do not hesitate to contact Anna Ryan or another member of Lane Neave’s Corporate Team.
Business Law Team
Gerard Dale, Claire Evans, Graeme Crombie, Evelyn Jones, Anna Ryan, Joelle Grace, Nicola Hardy, Peter Orpin, Ellen Sewell, Matt Tolan, Kristina Sutherland, Jacob Nutt, Danita Ferreira, Whitney Moore, Stephanie Bode, Carlo Wan, Alex Stone, Ben Cooper, Lisa Catto, Cameron Hart
also in this edition:
Business law newsletter:
Partner Lane Neave
t +64 3 377 6395
m +64 21 117 4940
e (click to email)