Consumer law – contravention of ss18, 29 and 34 of the Australian Consumer Law (ACL)

In Australian Competition and Consumer Commission v Trivago NV [2020] FCA 16 (20 January 2020) the court held that Trivago contravened ss18, 29 and 34 of the Australian Consumer Law (ACL) by various representations that it made when Trivago conducted an online search and price comparison platform for travel accommodation.

Trivago’s website presented prices from a number of different online booking sites for a particular hotel. One price was presented in green, in a large font with space around it (the Top Position Offer).

The ACCC’s case was that at various times in the period from 1 December 2016 to 13 September 2019, Trivago made the following representations in breach of the ACL:

a. that the Trivago website would quickly and easily identify the cheapest rates available for a hotel room responding to a consumer’s search (the Cheapest Price Representation)
b. that the Top Position Offers were the cheapest available offers for an identified hotel, or had some other characteristic which made them more attractive than any other offer for that hotel (the Top Position Representation)
c. that the red strike through text on the website (the Strike-Through Price) was a comparison between prices offered for the same room category in the same hotel (the Strike-Through Representation)
d. that the red text without strike-through (the Red Price) was a comparison between prices offered for the same room category in the same hotel (the Red Price Representation).

The ACCC also alleged that Trivago engaged in conduct that led consumers to believe that the Trivago website provided an impartial, objective and transparent price comparison which would enable them to quickly and easily identify the cheapest available offer for a particular (or the exact same) room at a particular hotel (the additional conduct allegations).

Trivago admitted parts of the ACCC’s case but disputed others (at [11] and [34]). The court substantially found for the ACCC on the contested parts of the case, although not necessarily for all the time periods argued by the ACCC (at [15] and from [190]).

The court received and analysed complex computer science expert evidence from both parties (at [91]-[145]), particularly on the algorithm used by Trivago to select the Top Position Offer. The experts agreed that in approximately 66% of listings, higher priced hotel offers were selected as the Top Position Offer over alternative lower priced offers (at [13] and [125]). This was of particular relevance to why the Cheapest Price Representation was misleading and deceptive. Moshinsky J explained at [204]: “…the expert evidence establishes that the offer that was given most prominence on the website (that is, the Top Position Offer) was in many cases not the cheapest offer for the hotel room. Based on the data they examined, the computer science experts agreed that higher priced offers were selected as the Top Position Offer over alternative lower priced offers in 66.8% of listings. Conversely, 33.2% of listings had a Top Position Offer that was the cheapest offer. …The explanation for the fact that in many cases the Top Position Offer was not the cheapest offer relates to the role of the CPC in the Top Position algorithm…”

The CPC is the Cost Per Click, which is Trivago’s principal source of revenue. Trivago’s contractual terms required online booking sites to pay Trivago the CPC if a consumer clicks on the online booking site’s offer on the Trivago website whether or not the consumer makes a booking on the online booking site’s website (at [12]).

The judgment includes findings on consumer behaviour evidence based on expert evidence called by both parties (at [146]-[177]).

There will be a subsequent hearing on relief, including the quantum of pecuniary penalties to be paid by Trivago.

Representative proceedings – application of cy-près doctrine to the distribution of monies from the settlement of a class action

In Simpson v Thorn Australia Pty Ltd trading as Radio Rentals (No.5) [2019] FCA 2196 (20 December 2019) the court approved the settlement of a proceeding instituted under Part IVA of the Federal Court of Australia Act 1976 (Cth) (FCA) pursuant to s33V of the FCA. The allegations in the class action concerned the obtaining of financial products for personal, domestic or household purposes and whether the provider engaged in conduct which was misleading or deceptive, involved the imposition of contract terms that were unfair, and engaged in unconscionable conduct contrary to various statutory norms.

Of interest is the court’s consideration of a clause in the settlement distribution scheme which provided that, if there was an outstanding balance remaining in the settlement fund as at the date of final distribution to group members who were participating, the administrator:
“…may exercise its discretion based on a consideration of what is materially proportionate to distribute the additional amount to some or all Participating Group Members or make a donation to the Financial Rights Legal Centre…or such other community legal centre as approved by the Court” (at [16]).

Lee J considered the source of power to allow an administrator to pay the residuum of a settlement distribution pool to charities and not-for-profit organisations and when such a power, if it exists, should be exercised (at [17]-[27]). The origins of the cy-près doctrine were summarised.

In general terms, the doctrine allows a court to continue to apply charitable trusts where the intent of the settlor can no longer be effectuated, such that an alternative plan can be designed which will serve to carry out the donor’s intent as nearly as possible (at [19]). The court discussed the adaption of the cy-près doctrine to the class action context in the United States (at [20]-[22]).

After turning to the principles relevant for a court to order a cy-pres scheme in Australia (at [22]), Lee J held at [24]: “I consider that the Court presently possesses sufficient power to fashion a remedy to allow a distribution of a settlement sum pursuant to a form of cy-près scheme if it is impracticable or impossible to distribute all or some of the settlement sum to group members individually (being circumstances directly analogous to there being a trust which has exhausted its original purpose and a surplus remains).” Lee J further held at [25] that, even if he was wrong about the position in equity, s33V(2) of the FCA Act was wide enough to provide this court with such power.

On the clause before it, the court was not satisfied on the present evidence that it was impracticable or impossible to distribute all of the settlement sum to group members or to some of them (at [28]). Instead of approving the proposed clause, the court reserved liberty for the claims administrator to apply to the court, in the event there was a residual sum, to present proposals which facilitated the most efficient distribution of this residual sum to those of the group members who were most in need of it (at [29]).

The full version of these judgments can be found at austlii.edu.au.
Dan Star QC is a Senior Counsel at the Victorian Bar, ph 03 9225 8757 or email danstar@vicbar.com.au.

This story was originally published in Proctor April 2020.

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