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Misleading advertising can be very costly – Consumer Law



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Some recent, high-profile cases have highlighted the significant
fines for businesses found guilty of misleading advertising. The
$44.7 million fine imposed on travel group Trivago by the Federal
Court for misleading customers demonstrates that making false
claims in advertising can be very costly.

Trivago breaches Australian Consumer Law with misleading
advertising

The global hotel booking giant Trivago advertised widely that it
made it easy to find the “best price”, whereas in fact
the company often listed more expensive options at the top of its
search results. (Please see Australian Competition and Consumer Commission
v Trivago N.V.
(No 2) [2022] FCA 417
.)

The Australian Competition and Consumer Commission sought a
penalty of $90 million when it took Trivago to court for breaching
Australian Consumer Law on multiple occasions. Trivago argued $15
million was an appropriate penalty.

How Trivago misled its customers

Justice Mark Moshinsky said in his judgement that Trivago’s
breaches of consumer law were “extremely serious”, as its
advertising was “highly misleading”.

Trivago was found by the court to have chosen its top listed
hotels according to which online hotel booking site paid Trivago
the highest cost-per-click fee.

The judgement said Trivago’s advertising conveyed that the
Trivago website would quickly and easily identify the cheapest
rates available for a hotel room responding to a consumer’s
search.

But the website did not do this. Higher priced offers were
selected for the top position over alternative, lower priced offers
in 66.8 per cent of listings.

The court found that over three years, 93 per cent of clicks
went to the offer in the top position – about 57 million clicks.
Over that period Trivago earned $92 million from those deceptive
top listings.

The court found consumers paid $30 million more for their hotel
rooms than they would have if they had always clicked on the
cheapest offer, instead of the top offer listed by Trivago.

Misleading advertising found to be in breach of consumer
law

The judgement in the Trivago case demonstrates that misleading
advertising or making exaggerated claims in marketing can be
punished harshly if it is deemed to have breached consumer law,
which is designed to protect consumers.

The court found that Trivago’s actions were on the very
serious end of the spectrum. It was a very large business which had
not just made an error or exaggerated something: instead it had
acted with great deliberation simply to maximise its profits, with
little regard for the interests of its customers.

However, it cannot be assumed that a small business just making
some misjudgement might be treated leniently. The court cited a
very recent High Court case emphasising that the principal
consideration in setting a penalty in this field is deterring
non-compliance. This is why it is so important for businesses to be
satisfied that their advertising is not misleading.

If a business is in doubt about whether its marketing could
breach consumer law, it would be wise to get legal advice before it
ends in a huge fine and loss of reputation.

Uber’s misleading or deceptive conduct

Another massive fine is already in the pipeline, with Uber
admitting to the ACCC that it had engaged in misleading or
deceptive conduct and made false or misleading representations in
the Uber ridesharing app.

Uber admitted it told two million customers they could be
charged a fee for cancellations that were actually free, and for
inflating the predicted price of regular taxis. A proposed $26
million fine is currently before the Federal Court.

Geoff Baldwin

Misleading and deceptive conduct claims

Stacks Champion

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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