Hotel price comparison website Trivago misled consumers about hotel prices in its online and offline advertisements, the Federal Court has ruled, in a case which the ACCC says has implications for the disclosure of how advertising influences search results.
The Germany-headquartered company used an algorithm that promoted “deals” which generated more advertising revenue rather than the best-priced options for consumers, despite the promoted listing offering no additional value to consumers.
The practice misled consumers because Trivago had represented itself as a platform to help users find the cheapest rates in its advertisements and it did not disclose the relationship with advertisers to consumers, according to federal court justice Mark Moshinsky.
“Contrary to the impression created by the relevant conduct, the Trivago website did not provide an impartial, objective and transparent price comparison service,” justice Moshinsky said yesterday.
Update 22/01/20: Trivago says it will closely review the Federal Court’s decision which provides “new guidance” on how comparator websites like Trivago should display results.
The ACCC instituted the proceedings in 2018, alleging Trivago had made the fair price comparison claims in more than 400,000 advertisements aired between 2013 and 2018.
However, when Trivago users searched for hotels the rankings displayed were weighed heavily on which “deal” generated the highest cost per click fee, Trivago’s primary source of revenue. Cheaper options were concealed or demoted in 66.8 per cent of cases, according to the ACCC.
“Trivago’s hotel room rate rankings were based primarily on which online hotel booking sites were willing to pay Trivago the most,” ACCC Chair Rod Sims said this morning.
“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 conduct was “particularly egregious” and also included comparing discounted hotel rooms with more premium rooms to create a false sense of value, Sims said.
A hearing on relief, including penalties, will be held at a later date but Sims says the ruling sends a message to other comparison and aggregation sites.
“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.”
Sims and the ACCC received extra resources and remit to investigate the online advertising ecosystem as part of the governments response to last year’s Digital Platforms Inquiry, with an investigation expected to begin this year.