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Independent Price Comparison Sites could be a saving grace for post-recession travellers

 

Price comparison websites and the savings they quote are frequently under the consumer law microsocope. In 2019, proceedings were brought by the ACCC against comparison website iSelect. Now in 2020, a Federal Court judgement involving the hotel comparison website Trivago, found that results rankings and purported price savings misled customers. The judgement against Trivago highlights how price comparison websites ought to operate for post-COVID-19 travellers, and how such sites should ensure compliance with Consumer regulations.

 

Trivago and the current Australian consumer protection framework  

 

Earlier this year, in Australian Competition and Consumer Commission v Trivago N.V, the Federal Court of Australia found Trivago to have breached the Australian Consumer Law (ACL) for engaging in misleading and deceptive conduct regarding the pricing, ranking and design of their accommodation listings. This decision, coupled with the 2019 proceedings against iSelect, is an important reminder of the Australian Competition and Consumer Commissioner’s (ACCC) scrutinization of comparative pricing platforms, and the accurate representations that are required of companies that operate such platforms.   

 

The ACL is the national law applicable to all sectors in each State and Territory, included as a schedule to the Competition and Consumer Act 2010 (Cth). As the primary consumer protection legislation in Australia, consumers are afforded the same rights, and all businesses are required to adhere to the same obligations, regardless of jurisdiction. The ACL regulates business conduct, basic consumer guarantees for goods and services (including the safety of such goods and services), and certain types of business-to-consumer transactions. These rights and obligations are enforced by the ACCC, and each State and Territory’s consumer law agency.

 

Objective comparison platforms  

shallow focus photography of red apples

 

In consideration of the growth in comparator websites within Australia, the ACCC has played an important role in facilitating a fair and transparent digital economy for both consumers and businesses. Comparator websites operate by compiling goods and/or services offered by multiple providers, and comparing the results on a single platform. Often, the consumer will be able to specify particular features that they are looking for in a product and personalise their search accordingly. The platform then runs an algorithm to adjust to the consumer’s filters, producing results that are subsequently ordered and displayed. 

 

This mechanism provides important benefits for both consumers and businesses alike. For consumers, increased competition affords greater choice in products, as well as the potential improvement in the quality of goods and services offered, and savings in time and costs. Particularly for start-ups or smaller businesses confronted with larger competitors, comparison platforms can even the playing field by providing a larger customer base without excessive overheads. 

 

Despite these benefits, substandard conduct by industry participants may undermine the effectiveness of these platforms, as has been demonstrated by Trivago. 

 

So, what about Trivago? 

 

person holding silver iphone 6

Trivago is a comparator website used by prospective travellers to compare accommodation pricing. Rather than consumers having to individually browse specific providers (such as Expedia, Wotif or Booking.com), Trivago will compile the relevant search results on its site. 

 

However, in 2018, the ACCC commenced proceedings in the Federal Court of Australia against Trivago, alleging misleading and deceptive conduct. In January 2020, the Court held that:

1. the use of ‘red price’ and ‘strike-through representation’, which seemingly indicated that the price provided was the best offer when the comparisons were not necessarily between the same room category in the same hotel, was misleading;

2. ‘top position representations’, whereby a listing in the top position conveyed that it was the cheapest or best offer, was in fact misleading or deceptive, as the ranking prioritised booking sites that paid Trivago the highest ‘cost-per-click’ fee; and

3. Trivago’s overall representation as an ‘objective comparison’ tool that could quickly identify the cheapest price available was misleading and deceptive.

 

What does this mean for me? 

 

Subsequent ACCC v Trivago, the ACCC forewarned prospective action against comparison platforms within other industries. As a case in point, in April 2019, the ACCC launched its proceedings against iSelect for misleading representations in conducting its energy plan comparison services. 

airplane on sky during golden hour

 

This is thus a stark reminder that companies claiming to provide ‘objective comparisons’ must ensure compliance with consumer regulations. In particular, companies ought to:

1. consider the content being presented, including elements such as the design on websites and marketing, to decide whether the overall impression being created is false or inaccurate;

2. ensure disclaimers advising consumers of the nature of the comparative pricing statements, and any other qualifications regarding the provision of the service, are positioned in a clear and identifiable manner;

3. remove any ambiguous language that may lead to incorrect assumptions regarding the comparative pricing being presented;

4. facilitate accurate, like-for-like comparisons when making ‘cheapest price’ or ‘red price’ and ‘strike-through representations’; and

5. consider the Courts’ recent scrutiny of algorithms used by businesses, assuming reliance will be placed upon evidence provided by computer scientists for companies that utilise such mechanisms.  

 

Needless to say, the ACCC will continue to closely monitor comparison platforms, despite their acknowledged benefits to consumers and businesses alike. Companies that are providing such services ought to adhere to consumer regulations by doing exactly what they claim to do: provide ‘objective comparisons.’

 

About this article

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