Hotel comparison site Trivago has been found by the federal court to have misled consumers by promoting hotels that pay for the coveted top spot on the platform.
If you've seen the endless ads run by Germany-based Trivago on TV or online, you'll know their prerogative is to help customers find the cheapest hotel rate possible.
But according to a Federal Court decision,Trivago has misled consumers since at least 2016 by promoting hotel booking sites that pay the platform the highest cost-per-click.
This means the rankings on the site, which are the business' entire model and the main indicator for customers to select a hotel or booking site, often did not highlight the cheapest rates for consumers.
"Trivago's hotel room rate rankings were based primarily on which online hotel booking sites were willing to pay Trivago the most," says Australian Competition and Consumer Commission (ACCC) Chair Rod Sims.
"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."
Trivago's algorithm works by aggregating deals offered by online hotel booking sites (eg. Expedia, Hotels.com, etc) and hotels' own websites and highlights the best deals out of all possible options.
However, the algorithm prioritised higher-priced room rates as the top position over alternative, lower-priced offers in 66.8 per cent of listings.
This was because the company was generating revenue from cost-per-click payments from online hotel booking sites. See below for example where the $299 deal is highlighted when a cheaper deal was available if the customer clicked the 'More Deals' button.
The Court also found 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.
"We brought this case because we consider that Trivago's conduct was particularly egregious," says Sims.
"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."
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.
"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," says Sims.
A spokesperson from Trivago says the Federal Court's judgement has clarified how aggregator websites should work in Australia.
"The judgment received yesterday from the court provides new guidance on how results of comparator websites, like Trivago and others, should be displayed in Australia," says Trivago.
"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."
The ACCC has sought orders for penalties, declarations, injunctions and costs from Trivago. A hearing on penalties will be held at a later date.
Business News Australia
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