The world of online travel agents (OTAs), travel search engines and aggregators may become a little more difficult now the Australian Competition and Consumer Commission (ACCC) has turned the heat on one of the most prominent operators, Trivago, part of the Expedia Group.
The realm of OTAs is dominated by two huge players: Expedia and Booking Holdings. The two own numerous sub-brands, which many consumers erroneously assume to be independent operators.
For instance Expedia (which has Chelsea Clinton on its board, among others) owns Trivago, Travelocity, Orbitz and Hotels.com; while Booking Holdings owns Booking.com, Priceline.com, Agoda.com, Kayak.com and Cheapflights.
Trivago is a search engine that aggregates online hotel offers from online travel agents, hotel chains and independent hotels.
The ACCC has instituted proceedings in the Federal Court against trivago N.V. (Trivago) alleging it made misleading hotel pricing representations in its television advertising and website, in breach of the Australian Consumer Law (ACL).
The ACCC is increasingly focusing on any behaviour it sees as breaching the ACL.
In this case, the ACCC alleges that from at least December 2013, Trivago ran TV advertisements presenting its website as an impartial and objective price comparison service that would help consumers identify the cheapest prices for hotel rooms when, in fact, Trivago’s website prioritised advertisers who were willing to pay the highest cost per click fee to Trivago.
The ACCC understands that Trivago’s TV advertisements at issue in this case aired over 400,000 times from December 2013. In April 2018, Trivago ceased running TV ads featuring representations about price.
Trivago’s website aggregates deals offered by online travel sites (like Expedia, Hotels.com and Amoma) and hotel proprietors for available rooms at a hotel and then highlights one price out of all their advertisers, which the ACCC alleges created an impression it is the best deal. However, in many cases the highlighted price was not the cheapest available at that hotel.
A sample of Trivago’s TV advertisement as at 24 December 2017
“Based on Trivago’s highlighted price display on its website, we allege that consumers may have formed the incorrect impression that Trivago’s highlighted deals were the best price they could get at a particular hotel, when that was not the case. Trivago based its rankings on the highest cost per click it would receive from its advertisers,” ACCC Chair Rod Sims said.
“We allege that because of the design of Trivago’s website and representations made, consumers were denied a genuine choice about choosing a hotel deal, by making choices based on this misleading impression created by the Trivago website.”
The ACCC also alleges that Trivago’s online strike-through price comparisons were false or misleading because they often compared an offer for a standard room with an offer for a luxury room at the same hotel, creating a false impression of savings offered for the standard room.
“We also allege that by not making genuine room price comparisons, consumers would likely have paid more than they otherwise would have for the same hotel. Further, hotels may have lost potential business as a result of this alleged conduct,” Sims said.
The ACCC says its investigation uncovered data that shows consumers who visited Trivago’s website overwhelmingly clicked on the most prominently displayed offers for each hotel.
“This case highlights growing concerns the ACCC has in relation to comparison platforms, and on how algorithms present search results to consumers,” Sims said.
“We are very concerned that such platforms convey an impression that their services are designed to benefit consumers, when in fact listings are based on which supplier pays the most to the platform.
“Businesses must ensure the nature of search results, such as if they are sponsored or paid for, is made clear to consumers or they risk contravening the Australian Consumer Law.”
The Accommodation Association of Australia was jubilant at news of the ACCC action. It said that if the allegations were proved, “it is a disgrace and Trivago should face significant sanctions”.
“The ACCC deserves credit for seeking to hold Trivago to account – and this should be one of many ways our competition regulator is scrutinising the practices of Trivago and offshore-based online travel agencies, which overwhelmingly dominate the Australian accommodation booking market,” Accommodation Association of Australia chief executive, Richard Munro, declared.
“Hikes in commissions, a lack of professionalism in their dealings with operators of accommodation businesses, compelling accommodation operators to agree to room-rate price parity clauses, paying virtually no tax in Australia and employing very few Australians are among the many ways the likes of Trivago and offshore-based online travel agencies are wrecking balls for Australia’s accommodation industry.”
Munro continued: “The Accommodation Association urges the ACCC to investigate the relationship between Trivago and its parent company, Expedia, to help ensure that Australian consumers and Australian accommodation operators are not being ripped off.
“The Accommodation Association re-states its position that room-rate price parity clauses should be banned in Australia immediately.
“This follows bans on room-rate price parity clauses being introduced in France, Belgium, Austria, Germany, Italy and Sweden.
“As things stand, for consumers to maximise their chances of paying the lowest possible room-rates in Australian accommodation businesses, they should contact the accommodation business direct or try a bricks-and-mortar accredited Australian travel agency,” Munro said.
The ACCC’s increased scrutiny on perceived breaches of the ACL comes as legislation passed Australia’s Federal Parliament last week to massively increase maximum financial penalties for such breaches. The penalties will go up almost tenfold.
In its final report on the ACL Review, Consumer Affairs Australia and New Zealand (CAANZ) recommended penalties for a breach of the ACL be raised from AUD 1.1 million for companies to the greater of AUD 10 million, three times the value of the benefit received, or where the benefit cannot be calculated, 10% of annual turnover in the preceding 12 months. Penalties against individuals under the ACL will also increase from AUD 220,000 to AUD 500,000 per breach.
“Companies will now face more serious financial consequences for breaching consumer law that align with competition law breaches,” Sims said.
“We have strongly advocated for higher maximum penalties to enable courts to impose more substantial penalties. Penalties need to hit the bottom line so they are not simply seen as the cost of doing business. Perhaps more important, penalties need to be high enough to be noticed by boards and senior managers so that compliance with the law is a higher priority. ”
“Increased penalties will help to deter large companies from breaching consumer laws. This is a profound change that I believe will improve corporate behaviour significantly, and so improve the Australian economy and how it works for consumers.”
Written by Peter Needham
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