The Australian consumer watchdog is taking Trivago to court over allegations the company duped customers about room rates in a practice deemed “disgraceful” by the industry.
The Australian Competition and Consumer Commission (ACCC) claims the hotel booking comparison site made misleading representations of hotel prices in TV and online advertisements.
Leading representative body the Accommodation Association of Australia (AAoA) says that, if found to be true, the practice is “a disgrace” and Trivago should face “significant sanctions”.
ACCC chairman Rod Sims said the watchdog was concerned websites such as Trivago gave the impression they were designed to benefit consumers when in fact listings were based “on which supplier pays them the most money”.
“If you look at Trivago’s advertisements it’s got a lot to do with getting the best price, when in fact the hotel that comes up in the listings is the one that’s paid Trivago the most money,” Mr Sims said.
“We would allege it’s all to do with Trivago making their site look more attractive to the suppliers. Not the consumers, the suppliers.
“So the potential for consumer detriment from the allegations that we’ve made today is, I think, enormous.”
The ACCC began investigating Trivago about a year ago, after hotels contacted the watchdog with concerns about the way prices were displayed.
It will allege in Federal Court that from December 2013, TV adverts positioned Trivago as an impartial and objective price comparison service helping consumers identify the best deals available on hotel room bookings from other online sites, such as Expedia and Hotels.com.
However, the ACCC says that the highlighted price was often not the cheapest available at that hotel.
Instead, Trivago allegedly prioritised advertisers willing to pay the highest cost-per-click fees for a position on its platform. Trivago is a subsidiary of Expedia Group for which cost-per-click payments are the main source of revenue.
“Based on Trivago’s highlighted price display on its website, we allege 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,” said Sims.
The adverts have aired more than 400,000 times, according to the ACCC, only ceasing in April.
Richard Munro of the AAOA praised the commission’s action, saying scrutiny of the off-shore travel agencies and booking platforms which dominate the local accommodation market is essential.
“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,” said Mr Munro.
“If unethical and unlawful practices by Trivago and offshore-based online travel agencies operating in Australia is proven to have taken place, guilty parties deserve to face the full weight of Australian law.
“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.”
Mr Munro renewed calls for an ACCC-led ban on rate parity clauses imposed on accommodation operators by the offshore giants, a move which Accomnews exclusively revealed last week may be imminent.
“The Accommodation Association re-states its position that room-rate price parity clauses should be banned in Australia immediately” he said.
“This follows bans on room-rate price parity clauses being introduced in France, Belgium, Austria, Germany, Italy and Sweden.
“Any unethical and unlawful practices which disadvantage consumers and accommodation businesses must not be tolerated under any circumstances.”
In addition to the cost-per-click issues, the ACCC contends that online ‘strike-through’ comparisons may have been false or misleading because they compared rooms of different tiers, such as a standard room versus luxury room, from the same hotel.
“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,” Mr Sims said. “Further, hotels may have lost potential business as a result of this alleged conduct.”
The watchdog’s investigations and data showed the majority of consumers visiting Trivago’s website clicked on the most prominently displayed offers for each hotel.
In a statement, Trivago said it was disappointed by the ACCC’s action and would “vigorously defend” its interests.