Court orders Trivago pay $44.7m in penalties for misleading consumers

Court orders Trivago pay $44.7m in penalties for misleading consumers

Photo: Kaitlyn Baker, via Unsplash.

Hotel comparison website Trivago has been ordered by the Federal Court to pay $44.7 million in pecuniary penalties for misleading consumers into clicking on paid promotions they incorrectly thought were the cheapest options.

The fine relates to a determination made in early 2020 about the German multinational's behaviour in the Australian market from at least as early as December 2016.

In handing down the penalties for the case brought by the consumer rights watchdog before the Federal Court of Victoria, Justice Moshinsky said Trivago's contraventions of sections 29 and 34 of Australian Consumer Law were "extremely serious".

"The television advertising conducted by Trivago during the early part of the relevant period was highly misleading," Justice Moshinsky said.

"The advertising conveyed that the Trivago website would quickly and easily identify the cheapest rates available for a hotel room responding to a consumer's search, but in fact the website did not do this.

"Higher offers were selected as the top position offer over alternative lower priced offers in 66.8 per cent of listings."

A screenshot of one of Trivago's ads.
A screenshot of one of Trivago's ads.

 

Justice Moshinsky added the lengthy period of time over which these practices took place and the large number of people affected also contributed to the level of the fine, with a substantial loss or damage caused by Trivago's contraventions while the company derived substantial revenue from the conduct. 

"Although the television advertisements related to only the early part of the relevant period, other conduct engaged in by Trivago in contravention of the relevant provisions extended for nearly three years," he said.

"The evidence presented for the relief hearing shows that during the relevant period there were approximately 111 million click-outs on the Trivago website. The overwhelming majority - approximately 104 million, or 93 per cent - of the click-outs were on the top position offer. 

"There were approximately 57 million click-outs on a top position offer for an identified hotel where the top position offer was not the cheapest offer for that hotel."

In 2020 the company admitted that between December 2016 and September 2019 it had received approximately $58 million in cost-per-click fees from clicks on offers that were not the cheapest available offer for a given hotel, causing consumers to overpay hotel booking sites approximately $38 million for rooms featured in those offers. 

An example of Trivago’s online price display taken on 1 April, 2018. For example, the $299 deal is highlighted below, when a cheaper deal was available if a consumer clicked “More deals”.
An example of Trivago’s online price display taken on 1 April, 2018. For example, the $299 deal is highlighted below, when a cheaper deal was available if a consumer clicked “More deals”.

 

The judge divided the penalties, to be paid to the Commonwealth, into four sub-periods with the largest of $30.6 million relating to when Trivago's ads were broadcast on TV.

"In my view pecuniary penalties totaling this amount, are appropriate in the circumstances of this case, and necessary to achieve the purposes of specific and general deterrence," Justice Moshinsky said.

"The ACCC (Australian Competition and Consumer Commission) has been substantially successful in the proceeding. It is appropriate that there be an order that Trivago pay the ACCC's costs of the proceeding."

He also ordered a five-year restraint for Trivago from representing that top position offers are the cheapest available offer for an identified hotel or have some characteristic making them more attractive than any other offer for that hotel, if that is not the case.

ACCC chair Gina Cass-Gottlieb highlights the commission's priority to hold online businesses accountable for their representations to consumers, ensuring consumers are fully aware of the way these supposedly free services actually work and what influences the prices they display.

Trivago also mislead consumers by using strike-through prices which gave them the false impression that Trivago’s rates represented a saving when in fact they often compared a standard room with a luxury room at the same hotel,” Cass-Gottlieb said.

“Trivago’s conduct took advantage of consumers’ desire to find the best deal, and the Court’s decision to order such a significant penalty reflects the seriousness of Trviago’s conduct.

“This penalty sends a strong message not just to Trivago, but to other comparison websites, that they must not mislead consumers when making recommendations."

A spokesperson from Trivago said they were disappointed by the outcome.

"Following the initial judgement which offered new guidance about how results of comparator websites should display recommendations in Australia, trivago worked quickly to change its website so as to comply with the court’s decision," the spokesperson said.

"While we are disappointed with the outcome today, we look forward to putting this behind us and continuing to help millions of Australians find great accommodation deals."

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