Australian Federal Court finds Trivago guilty of misleading consumers

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Source image showing an example of Trivago’s online price display taken on 1 April, 2018: https://www.accc.gov.au/

The Australian Federal Court has ruled in favour of Australia’s competition watchdog ACCC in a case of misleading consumers by making false representations on the Trivago website.

Trivago, a Netherlands-incorporated online giant, claim to offer consumers comparisons between different hotels that would allow them to identify the cheapest offers based on unbiased, transparent hotel price comparisons.

The ACCC in their case stated that Trivago advertised itself as an impartial price comparison service when it was actually prioritising advertisers willing to pay the highest cost-per-click fee to Trivago, thereby breaching Australian consumer law.

According to Trivago’s contracts with their advertisers, hotels are required to pay Trivago a “cost per click” fee (CPC) whenever a consumer clicks on their offer on the site. The CPC is the website’s main source of income and is payable even when a consumer decides not to make a booking. This was a crucial element in the ACCC’s case against Trivago because offerings were in fact ranked according to advertising dollars and not lowest rates.

Justice Mark Moshinsky also ruled that by displaying red strike-through text consumers were deceived into believing they were clicking on the cheapest offer. He ruled that several sections of the Australian consumer law were disregarded from 2013 to 2018 in televised advertisements as well as through information on the Trivago website.

The ACCC called two witnesses during the trail; economics professor Robert Slonim from the University of Sydney, and Victor Bajanov, an expert on analytics and web algorithms. According to them, the algorithm used by Trivago selected higher-priced hotel offers for almost two thirds of the time when cheaper options were in fact available.

ACCC chair Rod Sims said felt that the court’s ruling sent a strong message that when ranking on comparison websites are based on advertising income, a website should be clear and upfront about that fact. When the case returns to Federal Court the ACCC will seek orders for penalties, declarations, injunctions as well as costs.