A dud deal for consumers Trivago ordered to pay
04 July 2022
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On 22 April 2022, the Court handed down its decision on penalty following its findings that Trivago had contravened the Australian Consumer Law. We previously reported on these proceedings here.
The penalty judgment focused on Trivago's representations to consumers that the hotel room offers displayed on its website with the most prominence (Top Position Offers) were the cheapest available room rates for a particular hotel, when in many instances this was not the case. A significant factor in determining the offer selected by Trivago's algorithm as the Top Position Offer was the amount of money that the relevant online booking site had agreed to pay to Trivago for each "click" by a consumer.
The factors the Court had regard to in imposing a penalty of $44.7 million included:
The Court considered there to be two benchmarks of assistance in determining the appropriate penalty:
Trivago submitted that the Court should assess the benefit it had obtained through the conduct by reference to its net profit, rather than its total revenue. The Court rejected this argument, noting that Trivago's net profit was significantly lower than its revenue because most of its revenue had been spent on advertising, which Trivago obtained a benefit from as the advertising attracted more consumers to its website.
In the circumstances, the Court considered it necessary for the purposes of deterrence to fix penalties that were far greater than the profit Trivago earned from the contravening conduct.
Authors: Anita Cade, Partner and Nick Perkins, Senior Associate.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.
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