Hotel booking company Trivago has been fined more than $44m for its “highly misleading” conduct over advertisements saying it would find customers the cheapest price for hotel rooms.
Trivago was found guilty by the Federal Court in 2020 for breaching Australian Consumer Law after a case was brought against it by the Australian Competition and Consumer Commission.
A primary factor in the company’s hotel room rate rankings were which online booking sites paid the highest cost-per-click (CPC) fee.
Trivago’s revenue was primarily obtained from these CPC fees.
It was discovered higher-priced room rates were selected as the Top Position Offer over alternative lower-priced offers in 66.8 per cent of listings, showing its influence on users.
In his judgment handed down on Friday, Justice Mark Moshinsky said Trivago’s conduct was “highly misleading” to consumers.
“The television advertising conducted by Trivago during the early part of the Relevant Period was highly misleading,” he 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.
“Further, Trivago represented that the Top Position Offers were the cheapest available offers for an identified hotel, or had some other characteristic which made them more attractive than any other offer for that hotel. This too was highly misleading.”
Justice Moshinsky estimated Trivago’s misleading advertising had cost consumers $30m dollars because they had picked more expensive hotels over cheaper ones.
“The position is that Trivago’s contraventions have caused loss or damage to Australian consumers in the order of $30 million, and no remediation has occurred. In my view, this calls for a substantial penalty,” he said.
On the $44.7m fine handed down, Justice Moshinsky noted there was ‘a considerable gulf between the parties’ on what the penalty should be.
The ACCC had been advocating for at least a $90m fine, while Trivago had said it should be $15 million.
Justice Moshinsky said the $44.7m fine came after “extremely serious” contraventions of the Australian Consumer Law and noted that Trivago’s proposed penalty was only half “of the estimated loss and damage suffered by consumers”.
ACCC Chair Gina Cass-Gottlieb said the fine reflected the “seriousness” of Trivago’s conduct.
“The way Trivago displayed its recommendations when consumers were searching for a hotel room, meant consumers were misled into thinking they were getting a great hotel deal when that was not the case,” Ms Cass-Gottlieb.
“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.
“This penalty sends a strong message not just to Trivago, but to other comparison websites, that they must not mislead consumers when making recommendations,”
Trivago has also been ordered to pay the legal costs of the ACCC.
