German transnational hotel comparison site Trivago is headed for Australia’s federal court later this month, facing fines of millions of dollars over misleading advertising.

Trivago has reportedly admitted to transgressions of Australia’s consumer laws after the country’s consumer watchdog, the Australian Competition and Consumer Commission (ACCC), instituted proceedings in the Federal Court on August 24.

“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 prioritized advertisers who were willing to pay the highest cost per click fee to Trivago,” the consumer advocate said in a statement at the time of the filing.

One of the main allegations is that Trivago created an impression it was highlighting “the best deal [when] in many cases the highlighted price was not the cheapest available at that hotel”.

The ACCC argued that Trivago’s search results prioritized advertisers who were willing to pay “the highest cost per click”.

Trivago has responded to the ACCC allegations in a closed filing, but it is understood that the documents include an admission that “the site led consumers to form an erroneous belief the results page contained the lowest prices”.

Such false claims are punishable by fines of up to $800,000 each.

The ACCC has been particularly scathing of Trivago’s “strike-through price comparisons” which it said are “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”.

In its FAQs, Trivago states: “The strike-through price corresponds to the cheapest offer we received from the most expensive booking site on Trivago for this hotel and your stay dates. Although our comparisons are always based on your chosen stay dates and number of occupants, they may not account for differences in room sizes, number of rooms, hotel amenities or meals, or different cancellation policy terms.”

The Trivago admission comes after strong denials of wrongdoing in August. At the time, Trivago told Skift in a prepared statement: “We are disappointed by the action the ACCC has chosen to take in relation to Trivago and will vigorously defend our interests.

“Trivago helps thousands of Australians find their ideal accommodation through personalized searches and a deep supply of hotel prices and other information. Our priority is to enable Australian travelers to find their ideal hotel.”

Trivago displays hotel pricing from a range of online sources including Expedia, Hotels.com, Trips.com and, in some cases, listings from individual properties themselves.

The ACCC action against Trivago is set down for the federal court of Australia in Melbourne on December 14, after the two parties failed to reach a mediated settlement by November 16.

AUSTRALIANS URGED TO BOYCOTT FOREIGN-OWNED HOTEL SITES

The legal challenge against Trivago comes amid growing negative sentiment in Australia towards hotel comparison sites, following an emotionally charged campaign led by electronics entrepreneur and aviation safety campaigner Dick Smith.

The entrepreneur, noted for his ‘Buy Australian’ activism, has slammed online hotel sites, including Expedia and Booking.com, for exploiting and extorting Australian hotel and motel owners and has called on consumers to boycott the services.

Smith claimed the booking giants are charging owners exorbitant commissions for bookings and extorting them to sign up by threatening that their properties will be sidelined if they are not included in the online listings.

At the time of the initial Trivago filing, ACCC Chairman Rod Sims alleged that “hotels may have lost potential business as a result of this alleged conduct”, opening the door to civil action by individual properties. Some in the industry are not ruling out the possibility of class actions by disadvantaged hotels and motels.

There may even be grounds for a consumer class action from travelers. “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,” said Sims.

Photo Credit: A sample of Trivago’s TV advertisement as at December 24, 2017 cited by the ACCC Skift