Global hotel booking giant Trivago has been fined nearly $45 million for misleading customers with ads claiming it’s easy to find “the best price” for rooms.
- Federal Court fined Trivago $44.7 million plus court costs for misleading consumers
- Consumers have not been compensated for booking more expensive hotel rooms and are estimated to have around $30 million out of pocket
- ACCC wanted fines of at least $90 million, but Triavgo wanted a total fine of less than $15 million
Two years ago the Federal Court found the company had breached Australian consumer law over a ‘prolonged period of time’, and today ordered the company to pay £44.7 million dollars in fines for his violations.
Trivago was also ordered to pay the legal costs of the Australian Competition and Consumer Commission (ACCC), which filed a complaint against it.
In his penalty orders, Judge Mark Moshinsky noted that there was a “significant divide between the positions of the parties”, with the ACCC seeking at least $90 million in fines and Trivago saying up to 15 million dollars would be appropriate.
Arriving at a figure in between, Judge Moshinsky noted that Trivago’s violations of the law were “extremely serious”.
“The advertisement stated that the Trivago website would quickly and easily identify the cheapest available rates for a hotel room that matched a consumer’s search, but in fact the website did not.
“Upper [priced] offers were selected as the top position offer over cheaper alternative offers in 66.8% of ads.”
Consumers lose $30 million due to ‘very deceptive’ behavior
Judge Moshinsky added that much of the offending conduct continued for almost three years, meaning a large number of consumers were affected, with nearly 93% of clicks going to the offer. “in first place”.
“There were approximately 57 million clicks on a first position offer for an identified hotel where the first position offer was not the lowest priced offer for that hotel,” he observed.
Trivago earned approximately $92 million in revenue from these non-cheaper clicks, out of a total of $178 million in revenue in Australia during the offending period (December 2016 to September 2019).
The court found that Trivago would have earned between $53 million and $58 million less if customers had always clicked on the cheapest offer.
The court also found 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-tier offers presented by Trivago.
In its defence, Triavgo proved that around three-quarters of its local revenue was consumed by its advertising spend and that it made “negative or very thin profit margins” on its Australian operations between 2017 and 2020.
It said the maximum profit it made from tickets was less than $3 million, out of a total profit for its Australian operations of $6.7 million between 2017 and 2019.
In response to the penalty, Trivago said it was “disappointed with the result”.
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 judgment which offered new guidance on how comparison website results should display recommendations in Australia, Trivago has worked quickly to modify its website to comply with the court ruling.”