What you need to know
- The Federal Court has ruled that Trivago misled consumers and breached Australian consumer law as a result of claims made during television advertisements and on its website with respect to offering the cheapest or best hotel deals.
- The algorithm used by Trivago to display what Trivago purported to consumers to be the cheapest or best hotel deals gave too much consideration to the amount that Trivago would be paid by the advertiser each time a consumer clicked on the offer.
- The Federal Court also found Trivago breached Australian consumer law through making representations that two offers in relation to the same hotel room were 'like for like' when in fact they were not.
What you need to do
- Businesses should carefully consider whether the representations they make about goods and services, and comparisons between goods or services, are accurate.
- Where software is used to determine an offer or make a representation about goods or services, businesses should ensure that the offer or representation made based on the results of the software accurately reflects the underlying representations that the software has analysed.
Trivago's hotel search and comparison service
Trivago carries on a business in Australia offering an online search and price comparison platform for travel accommodation offers. Trivago displays offers from online booking sites, online travel agencies or the hotel itself (Online Booking Sites). Trivago generates revenue when a user clicks on a specific deal being advertised by Trivago, which then triggers a requirement for the relevant Online Booking Site to pay Trivago a fee referred to as a 'Cost Per Click' (CPC).
Trivago invites the Online Booking Sites to submit bids for the CPC they will pay. An Online Booking Site's offer will only be displayed if it meets a minimum CPC amount.
Allegations made by the Australian Competition and Consumer Commission (ACCC)
The ACCC alleged that between 1 December 2016 and 13 September 2019 (Relevant Period), Trivago made the following four representations that, for the reasons set out below, resulted in breaches of the Australian Consumer Law (ACL):
- The Trivago website would identify the cheapest rates available for a hotel room (Cheapest Price Representation);
- Offers displayed on the website with the most prominence (Top Position Recommendation or Top Position Offer), were the cheapest available offer for the hotel identified or had some other characteristic that made them more attractive than other offers;
- Prices displayed directly above the Top Position Recommendation in red strike-through text (Strike Through Representation or Strike Through Price) were a comparison between prices offered for the same room category in the hotel identified; and
- Prices displayed directly above the Top Position Recommendation, in red strike-through text (Red Price Representation or Red Price) were a comparison between prices offered for the same room category in the hotel identified.
Top Position Algorithm and the CPC
While the experts that provided evidence to the Court disagreed on a number points, they agreed that the CPC was a major factor when Trivago's algorithm determined the Top Position Offer.
Conduct found to be in breach of the ACL
The Cheapest Price Recommendation
The Court referred to three television advertisements aired by Trivago, and statements that appeared beneath Google search results, all of which made representations that Trivago would find the consumer the hotel with the "best price". The Court held that a representation to provide the "best price" in this context was referring to the cheapest price.
Referring to expert evidence, the Court found that the Trivago website often did not provide the cheapest price for a hotel room. This was in part a result of the algorithm used by Trivago not displaying an Online Booking Site's offer unless the CPC exceeded a minimum threshold.
In making the Cheapest Price Representation, Trivago was found to have breached s 18 of the ACL through engaging in conduct that was misleading or deceptive or likely to mislead or deceive.
It was also held that, in making the Cheapest Price Representation, Trivago breached s 34 of the ACL through engaging in conduct that misled the public as to the nature, characteristics and suitability for purpose of the accommodation search service provided by the Trivago website.
Top Position Recommendation
As outlined above, the Court found that the Trivago website often did not provide the cheapest price for a hotel room.
It was observed that the Top Position Offer was presented in large green font with lots of white space around the amount. The Court held that this helped give the impression that the Top Position Offer was the best offer for the hotel.
Given the Top Position Offer was in many cases not the cheapest offer, in addition to this conduct also breaching s 18 of the ACL, Trivago was also found to have breached s 29(1)(i) of the ACL through, in connection with the supply or possible supply of accommodation services, making misleading representations with respect to the price of those hotel accommodation services.
Strike-Through Representation and Red Price Representation
The Court focused on the Strike Through Price, and later in the Relevant Period the Red Price Representation, being positioned above the offer given most prominence on the website. At [207], Moshinsky J explained that:
"The implicit representation that was conveyed was that the two offers that were juxtaposed, namely the Strike-Through Price and the Top Position Offer, were comparable offers apart from price; in other words, that the offers were, apart from price, 'like for like'."
The Court found that, given the prices offered were not a comparison between prices offered for the same room category at the same hotel, through making the Strike-Through Price and Red Price Representations Trivago had breached s 18 and s 29(1)(i) of the ACL.
Authors: Zack Di Pasquale, Lawyer; and Kellech Smith, Partner.
