Trivago was fined over $40 million for misleading consumers. Photo: Shutterstock
Hotel booking site Trivago has been ordered to pay $44.7 million in penalties after a federal court found the site breached Australian consumer law by tricking customers into believing they were getting the cheapest rates available for a given hotel.
Trivago, a German company owned by US travel giant Expedia, had built a high profile business based on claims that it would help consumers find the best price on hotel rooms.
“You search loads of websites looking for the best hotel deal,” said a 2017 TV ad explaining the Expedia-owned company’s business model.
“Stop doing this to yourself; let Trivago do it for you. Trivago compares the prices of hundreds of websites and apps at the same time. It’s so easy.”
“Instead of searching for hours or spending too much,” says another, “Trivago makes it easy to find the perfect hotel at the best price.”
The company’s television ad was “highly misleading,” Federal Court Judge Mark Moshinsky wrote in the final judgment, which found that the $44.7 million fine – which is about 8% of Trivago’s 2021 revenue of $560 million ($420 million) – is “appropriate in the circumstances of this case” and “necessary to achieve specific and general deterrence objectives”.
An in-depth investigation by the ACCC revealed in 2018 that, despite its claims to offer consumers the best possible price on a hotel room, Trivago used an algorithm that favored offers from any booking site paying at Trivago the highest cost per click fees.
Trivago amplified the deception by highlighting “crossed-out prices” that purported to demonstrate customer savings – but often featured a higher comparison price that was actually the price of a different deluxe room.
This gave consumers the “false impression that Trivago’s rates represented a saving,” ACCC President Gina Cass-Gottlieb said in announcing the penalty.
“The way Trivago displayed its recommendations made consumers think they were getting a great hotel deal when they weren’t.”
Consumers depended on Trivago for the lowest price on a hotel room. Photo: Shutterstock
Trivago’s site “often failed to highlight the cheapest fares for consumers,” she added, noting that Trivago’s behavior “benefited from consumers’ desire to find the best deal.”
Analysis of Trivago’s website logs confirmed consumers’ appetite for bargains, with 111 million clicks seen between December 2016 and September 2019, 104 million of which were from customers who clicked on the highest offer. important.
Of these, 57 million clicks were on non-cheapest pricing offers, which earned Trivago approximately $58 million in cost-per-click fees on non-cheapest offers. available for a given hotel room.
This happened 66.8% of the time, causing consumers to pay an additional $38 million during the period than they would otherwise have.
Fight against misleading prices
The fines mark the end of a four-year battle by the ACCC, which began suing Trivago in August 2018 and in January 2020 won a victory in Federal Court that was upheld on appeal.
The Federal Court victory was considered a “major victory for the ACCC” in an analysis by HWL Ebsworth Lawyers, who heralded it as a reminder of “the importance of ensuring that all comparison tools or representations offered to consumers accurately describe the nature of the research. results and the benefit (if any) to consumers if they rely on those results. »
The ACCC offers detailed guidance for businesses wishing to avoid breaching advertising and pricing rules, with guidance on dual-price advertising setting out the expectations placed on businesses under Australian consumer law .
“A critical question is whether affected consumers would have paid the ‘was’ or ‘barred’ price to purchase this item for a reasonable period of time before the sale began,” the guide says.
Companies must keep records “supporting any two-price request”, he adds, noting that such information may be necessary for regulatory investigations.
The hefty penalty reflects the results of an ACCC crackdown on misleading pricing that led to an increase in potential penalties in 2018.
Comparison site iSelect was fined $8.5 million in 2020 after its commission-based recommendations were found to be biased in favor of certain vendors.
Months later, travel agency STA Travel was fined $14 million for a sustained misleading campaign in which the company sold a product promising free ticket changes, then charged for the changes to customers even when the airlines had not imposed a fee for the change.
In 2019, the ACCC sued online retailer Kogan over a deceptive tax pricing campaign that resulted in a fine of just $350,000.
The magnitude of the latest sanction, Cass-Gottlieb said, “sends a strong message not only to Trivago, but to other comparison sites, that they should not mislead consumers when making recommendations. “.