Global hotel booking giant Trivago has been fined nearly $45 million for misleading customers with advertising that claimed it made it easy to find "the best price" for rooms.
Two years ago, the Federal Court found the company had breached Australian Consumer Law over a "lengthy period of time", and today it ordered the company to pay $44.7 million in penalties for its breaches.
Trivago was also ordered to pay the legal costs of the Australian Competition and Consumer Commission (ACCC), which brought the case against it.
In his orders on penalties, Justice Mark Moshinsky noted that there was a "considerable gulf between the parties' positions", with the ACCC arguing for at least $90 million in fines and Trivago saying up to $15 million would be appropriate.
In coming to a figure between the two, Justice Moshinsky noted Trivago's breaches of the law were "extremely serious".
"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.
"Higher [priced] offers were selected as the top position offer over alternative lower priced offers in 66.8 per cent of listings."
How Trivago misled consumers
When Justice Moshinsky decided that Trivago had breached consumer laws, in his previous judgement of 2020, he said: "The fact that Trivago was being paid by the online booking sites was not made clear."
Most of the time, the hotels listed at the top of the search results were not the best or cheapest deal. Trivago promoted hotels that paid it the biggest fees.
Consumers were also misled by "strike-through" price comparisons.
For example, it might list the hotel room's full price as $420 — with a "strike through" to show the price has been slashed — and the final price is listed as $299.
"Trivago misled 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," ACCC chair Gina Cass-Gottlieb said.
"Trivago's conduct took advantage of consumers' desire to find the best deal, and the court's decision to order such a significant penalty reflects the seriousness of Trivago's conduct.
"This penalty sends a strong message not just to Trivago, but to other comparison websites, that they must not mislead consumers when making recommendations."
Consumers lose $30m from 'highly misleading' conduct
Justice Moshinsky added that much of the offending conduct continued for nearly three years, meaning a large number of consumers were affected, with nearly 93 per cent of clicks going to the "top position" offer.
"There were approximately 57 million click-outs on a top position offer for an identified hotel where the top position offer was not the cheapest offer for that hotel," he observed.
Trivago earned approximately $92 million in revenue from those non-cheapest top position click-outs, out of a total of $178 million in revenue it earned in Australia over the offending period.
The court found that Trivago would have made between $53 million and $58 million less if customers had always clicked out onto the cheapest offer.
The court also estimated that consumers ended up paying about $30 million more for their hotel rooms than if they had always clicked on the cheapest offer, rather than the top-position offers featured by Trivago.
In its defence, Trivago gave evidence that about three-quarters of its local revenue was consumed by its advertising spend and that it made "negative or very slim profit margins" on its Australian business between 2017-2020.
It said the maximum profit it made from the contraventions was less than $3 million, out of a total profit for its Australian operations of $6.7 million between 2017-2019.
In response to the penalty, Trivago said it was "disappointed with the outcome".
The company also said, in a statement, that it looked forward "to putting this behind us and continuing to help millions of Australians find great accommodation deals".
"Following the initial judgement which offered new guidance about how results of comparator websites should display recommendations in Australia, Trivago worked quickly to change its website so as to comply with the court’s decision."
