The Australian Competition and Consumer Commission (ACCC) has taken aim at online airfare and hotel aggregator Trivago for allegedly misleading consumers in its price comparisons and advertisements.
The ACCC has started proceedings in the Federal Court claiming that from at least December 2013 the company ran TV advertisements presenting its website as an impartial price comparison service, yet preferential positioning was allegedly given to advertisers who were willing to pay the most.
Germany-headquartered Trivago's main source of revenue is the cost-per-click (CPC) payments it receives, where advertisers are charged a fee each time a user clicks on one of its offers.
The ACCC alleges Trivago's highlighted prices created an impression of the best deal, yet in many cases the prioritised deals were not the cheapest available at the hotel in question.
"Based on Trivago's highlighted price display on its website, we allege that consumers may have formed the incorrect impression that Trivago's highlighted deals were the best price they could get at a particular hotel, when that was not the case. Trivago based its rankings on the highest cost per click it would receive from its advertisers," says ACCC chair Rod Sims.
"We allege that because of the design of Trivago's website and representations made, consumers were denied a genuine choice about choosing a hotel deal, by making choices based on this misleading impression created by the Trivago website."
The ACCC also alleges that Trivago's online strike-through price comparisons were false or misleading because they often compared an offer for a standard room with an offer for a luxury room at the same hotel, creating a false impression of savings offered for the standard room.
"We also allege that by not making genuine room price comparisons, consumers would likely have paid more than they otherwise would have for the same hotel. Further, hotels may have lost potential business as a result of this alleged conduct," says Sims.
An investigation conducted by the ACCC uncovered data showing consumers who visited Trivago's website overwhelmingly clicked on the most prominently displayed offers for each hotel.
"This case highlights growing concerns the ACCC has in relation to comparison platforms, and on how algorithms present search results to consumers," says the ACCC chair.
"We are very concerned that such platforms convey an impression that their services are designed to benefit consumers, when in fact listings are based on which supplier pays the most to the platform"
"Businesses must ensure the nature of search results, such as if they are sponsored or paid for, is made clear to consumers or they risk contravening the Australian Consumer Law."
The regulator notes the company's TV ads at issue in the case aired more than 400,000 times before they ceased in April 2018.
Trivago, which is part of the Expedia Group (NASDAQ: EXPE), issued a statement this afternoon expressing disappointment with the ACCC's action.
"Trivago helps thousands of Australians find their ideal accommodation through personalised searches and a deep supply of hotel prices and other information. Our priority is to enable Australian travellers to find their ideal hotel," a spokesperson said.
"We agree with the ACCC's earlier public statement that "comparator websites can assist consumers to make more informed purchasing decisions when comparing what are often quite complex products, and can promote healthy competition by assisting small or new service providers to compete more effectively."
"We are disappointed by the action the ACCC has chosen to take in relation to trivago and will vigorously defend our interests."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Get our daily business news
Sign up to our free email news updates.