Commercial comparison sites like to bill themselves as the consumer’s best friend, but that’s not always the case.
Accommodation platform Trivago is the latest comparison site to fall foul of Australian Consumer Law for misleading consumers.
In a case brought by the consumer watchdog, the Federal Court ruled on Monday the Netherlands-based company misled the public when it claimed to provide a service that would find consumers the cheapest hotel rates.
In fact, Trivago often didn’t show customers the cheapest deals for hotel rooms, but instead used an algorithm to promote advertisers who paid them the highest cost-per-click fee.
“Contrary to the impression created by the relevant conduct, the Trivago website did not provide an impartial, objective and transparent price comparison service,” Federal Court Justice Mark Moshinsky said.
Australian Competition and Consumer Commission (ACCC) chair Rod Sims said Trivago’s hotel room rate rankings were based “on which online hotel booking sites were willing to pay Trivago the most”.
“By prominently displaying a hotel offer in ‘top position’ on its website, Trivago represented that the offer was either the cheapest available offer or had some other extra feature that made it the best offer when this was often not the case,” he said.
Trivago’s hotel room rate comparisons that used ‘strike-through’ prices or text in different colours were also found to be misleading.
The tactics gave consumers a false impression of savings because they often compared an offer for a standard room with an offer for a luxury room at the same hotel, the court found.
Mr Sims said the ACCC brought the case against Trivago because it considered the company’s conduct “particularly egregious”.
Many consumers may have been tricked by these price displays into thinking they were getting great discounts,’’ Mr Sims said.
“In fact, Trivago wasn’t comparing apples with apples when it came to room type for these room rate comparisons.”
The court’s decision “sends a strong message to comparison websites and search engines”, Mr Sims said.
“If ranking or ordering of results is based or influenced by advertising, they should be up front and clear with consumers about this so that consumers are not misled.”
A business model at odds with consumers’ best interests?
The business model of comparison sites has long been called into question.
In a damning 2018 report on the energy market, the ACCC found that commercial comparison websites often misled customers about the best energy deals, with the business model largely to blame.
The vast majority of sites operate on a ‘commission’ model, meaning the energy retailer pays the comparison website a fee whenever a consumer clicks through to the retailer, the ACCC found.
Additionally, sites rarely listed all the retailers in the market.
This means a consumer’s choice is limited to the energy retailers that have struck deals with the comparison site they’re using, and that the need to pay comparison websites increases energy retailers’ overheads, which increases the overall cost to the consumer.
In August, the ACCC lodged Federal Court proceedings against iSelect, alleging it made “false or misleading” claims about the independence of its energy comparison service.
The site “did not compare all available plans, and did not necessarily recommend the most competitive plan” when customers compared their energy plans through the site, despite its promises to compare all plans from partner retailers “in a specific location”, the ACCC said.
However, shopping around is key to getting a good deal, particularly in the energy market, and there are a number of reliable online tools from state and federal governments that can help consumers.
In New South Wales, the state government’s Energy Switch website independently compares the best plans from all providers to help consumers switch to the best deal. It will also notify you when it’s time to review your plan.
For the rest of the country, the federal government’s Energy Made Easy website provides guidance on how to read your electricity and gas bills, compares your energy usage with others in your area, and includes a comparison tool to help you find the right plan.
The website also provides details of concessions and rebates available around the country.