Deceptive and Misleading advertisement

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Deceptive and misleading advertisement is when a business makes false claims or impressions to consumers on price, value or quality of goods and services on offer. It is also unethical and illegal for business’s to engage in conduct that misleads or is deceptive to consumers under the Australian consumer law section 18. With this law still applying even if the business did not intent to mislead consumers as all information wasn’t provided to enable a good decision, directly impacting the consumers as they have wasted money on a product or service that did not meet the expectations guaranteed.

Trivago versus the ACCC

A recent example of this complex legal issue is the case between trivago a travel site company that finds the cheapest hotel bookings (supposedly) against the Australian Competition and Consumer Competition (ACCC) whose main purpose is to enforce legislation that protect consumers.

The ACCC believe Trivago is giving consumers false and deceptive information on which hotel booking is the cheapest. With the ACCC chair Rod Sims’s stating ” the business was using an algorithm to place significant weight on hotel booking’s that paid them the most cost per click as it is the business’s main source of revenue” (Trivago misled consumers about hotel room rates, ACCC, 2020). Basically meaning that Trivago’s hotel ratings were based primarily on which hotel booking site paid them the most. The ACCC has also accused trivago of using strike pricing methods where the business used higher price hotel offers as “top position offers” for more than 66% of listening over alternative lower priced offers. The business even using text in different colours (red versus green) giving consumers a false impression of saving.

ACCC Sues Trivago For Misleading Comparison Claims | LoyaltyLobby
An example of trivago using deceptive “strike through pricing” method’s on hotel price’s tricking consumer’s.

However, Trivago claim best isn’t always the cheapest in order to defend the claims made by the ACCC. With Neil Young representing trivago saying “that advertiser’s payments were the fourth or fifth most important factor with advertisement royalties”. Young also denied the use of the business false strike pricing strategy explaining ” there is more factors at play than simply price with the deals comparing hotel room size (Chanthadaong, 2020).

Which essentially means that if the ACCC can prove to the federal court trivago engaged in conduct that was misleading and deceptive breaking the Australian consumer law section 18 the business will be facing serious penalties.

The implantations of the case?

Unfortunately, for trivago the business has lost up to more than 20% of their customer base since being taking to court in 2018. Resulting in the media provoking bad publicity about the travel site company. Essentially making aware to many consumers to avoid trivago when looking for cheap hotel prices unless they wished to be tricked or deceived.

The ACCC have also taken the company to court over misleading information on a television advertisement where the business featured false representations of hotel prices. The advertisement airing more than 400,000 times from late 2013 to mid 2018 stopping the advertisement ultimately once the case against the ACCC began (“Absolutely outrageous” Trivago misled customer on hotel pricing, Khadem. N, 2020). With these circumstances severely hindering trivagos reputation as a consistent and reliable travel site amongst travellers resulting in a heavy loss of revenue, greatly affecting the businesses livelihood if trivago is proven guilty, it is expected they face substantial fines and penalties.

Trivago’s television advertisement which the ACCC believed mislead consumer’s

The case between trivago and the ACCC has also put other sites similar to the business such as Hotel Finder, HotelsCombined and Skyscanner under heavy suspicion by consumer watchdogs the ACCC. Where they have sent a strong statement that “if other businesses are caught misleading consumers through the use of false or deceptive advertisement they too will be taken to court”. It is through these claims and this tough scrutinisation of businesses that the ACCC will hopefully encourage companies to act and operate in a more professional and ethical manner. Allowing consumers to feel safe when booking hotels online through travel site businesses.

Results

On Monday the 20th of January 2020, the federal court ruled that travel comparison site trivago misled and used deceptive advertisement on it’s website and television advertisement.

Where trivago has been found quality of the following breaches:

  • Cheapest price representation: Where the businesses cheapest hotel room offer didn’t appear on their website. This fact alone was enough to render the cheapest price representation as misleading and deceptive breaking section 18 and 24 of the Australian consumer law.
  • Strike through price representation: With the businesses online comparison false and misleading as it was found that trivago compared offers for a standard room with luxury rooms using red and green text accompanied by juxtaposition to trick consumers into thinking that they were finding the cheapest price hotel (Major ACCC Win, Federal Court rules trivago misled customers, HWL Ebsworth Lawyers, 2020), again, meaning trivago breached section 18 of the consumer law.
  • Top position representation: Trivago was proven to have used an algorithm where the cheapest hotels offered, was simply what hotel paid them the most. Ultimately meaning the business again violated section 18 of the Australian consumer law.

Resulting in a major win for the ACCC whilst applying pressure to sites similar to trivago to operate in an ethical manner. It is said that trivago have been faced with millions of dollars in fines and penalties as result of losing the case.

Key take-aways

The decision highlights the importance for businesses to be ethical, truthful and aware of the claims that they make to consumers about price, value or the quality of goods and services provided. To ensure their marketing and advertisement is not misleading or deceptive to guarantee businesses comply with the Australian consumer laws.

References

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