ACCC Sues Trivago For Misleading Comparison Claims

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Australian Competition and Consumer Commission has sued Expedia owned Trivago for making false claims on its website and misleading consumers in Australia.

Trivago

ACCC claims that Trivago gives an impression that they are neutral third party that compares prices to help consumer to find the lowest one while they display the prices in order who paid them the most money to them.

Here’s the press release from Australian Competition and Consumer Commission:

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.

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.

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.

“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,” Mr Sims said.

The ACCC 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,” Mr 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.”

Notes to editors:

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 airing TV ads featuring representations about price.

Trivago is a search engine that aggregates online hotel offers from online travel agents, hotel chains and independent hotels. Trivago is part of the Expedia Group (NASDAQ: EXPE)

Trivago’s main source of revenue is the cost-per-click (CPC) payments it receives, where advertisers are charged a fee each time a user clicks on one of their offers.

The following is an example of Trivago’s online price display taken on 1 April, 2018. For example, the $299 deal is highlighted below, when a cheaper deal was available if a consumer clicked “More deals” (underneath the offers from other booking sites in the middle panel).

Trivago Example

Conclusion

I find it quite interesting that Expedia’s biggest competitor Booking.com is Trivago’s biggest advertiser representing 38% of their fee income and Expedia owned companies are roughly the same percentage (from one Expedia pocket to another). Why would Booking.com enrich Expedia?

You have to be careful with most of these price comparison engines because they mostly compare prices from websites that pay them and not necessarily from those that offer the lowest prices.

ACCC recently sued Meriton for running a TripAdvisor scam (read more here) and court fined the company $3 million AUD. It is interesting to see what will the outcome of this case.

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