FEDERAL COURT OF AUSTRALIA

Australian Competition and Consumer Commission v Trivago N.V. [2020] FCA 16

File number:

VID 1034 of 2018

Judge:

MOSHINSKY J

Date of judgment:

20 January 2020

Catchwords:

CONSUMER LAW – misleading or deceptive conduct – where the respondent conducted an online search and price comparison platform for travel accommodation – where the respondent’s television advertisements stated that the respondent made it easy “to find the ideal hotel for the best price” – where the website presented prices from a number of different online booking sites for a particular hotel – where one price was presented in green, in a large font with space around it (the Top Position Offer) – where the expert evidence at trial established that in approximately 66% of listings, higher priced offers were selected as the Top Position Offer over alternative lower priced offers – whether the respondent made each of the alleged representations – whether, if the representations were made, they were misleading or deceptive

Legislation:

Competition and Consumer Act 2010 (Cth), ss 4, 5, 155, Sch 2, Australian Consumer Law, ss 18, 29, 34

Evidence Act 1995 (Cth), ss 79, 81, 136, 140

Federal Court Rules 2011, r 5.04

Cases cited:

Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301

Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73

Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709

Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263

Australian Competition and Consumer Commission v Meriton Property Services Pty Ltd (2017) 350 ALR 494

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640

Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397

Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304

Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45

Cat Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] ASAL 55-103; [2003] FCA 133

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588

Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705

Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1

Optus Mobile Pty Ltd v Telstra Corporation Ltd [2018] FCA 745

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

REA Group Ltd v Fairfax Media Ltd [2017] FCA 91

Reckitt Benckiser (Australia) Pty Limited v Procter & Gamble Australia Pty Ltd [2015] FCA 753

Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177

Date of hearing:

9, 10, 11, 12 and 13 September 2019

Registry:

Victoria

Division:

General Division

National Practice Area:

Commercial and Corporations

Sub-area:

Regulator and Consumer Protection

Category:

Catchwords

Number of paragraphs:

278

Counsel for the Applicant:

Mr N O’Bryan AM SC with Mr Z de Kievit

Solicitor for the Applicant:

Corrs Chambers Westgarth

Counsel for the Respondent:

Mr N Young QC with Mr N De Young

Solicitor for the Respondent:

King & Wood Mallesons

ORDERS

VID 1034 of 2018

BETWEEN:

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

Applicant

AND:

TRIVAGO N.V.

Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

20 JANUARY 2020

THE COURT ORDERS THAT:

1.    The orders made on 19 September 2019 (which relate to confidentiality) be varied to the extent necessary to enable the material in the reasons for judgment to be published.

2.    The matter be listed for a case management hearing on a date to be fixed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MOSHINSKY J:

INTRODUCTION

[1]

THE ORIGINATING APPLICATION, THE CONCISE STATEMENT AND THE CONCISE RESPONSE

[16]

THE HEARING

[35]

FACTUAL FINDINGS

[43]

Trivago

[44]

Trivago’s advertising and marketing

[46]

The Trivago website

[53]

The first relevant sub-period (1 December 2016 to 29 April 2018)

[62]

The second relevant sub-period (29 April 2018 to 20 November 2018)

[69]

The third relevant sub-period (20 November 2018 to 13 February 2019)

[74]

The fourth relevant sub-period (13 February to 13 September 2019)

[78]

The KWM September 2017 letter and Trivago’s Response to the ACCC

[82]

FINDINGS IN RELATION TO THE COMPUTER SCIENCE EXPERT EVIDENCE

[91]

Question 1: Making reference to the source code, pseudocode and written descriptions in the documents provided, provide a brief, high-level description of how the Top Position and Default Sorting algorithms operate

[97]

Question 2: What factors influence whether an offer is selected as the Top Position Offer?

[104]

Question 3: What is the weighting or relative importance of these factors?

[106]

Question 4: How and to what extent (if any) does the Top Position offer algorithm filter certain offers made by advertisers?

[122]

Question 5: How important is an advertiser’s CPC payment in determining the Top Position Offer?

[123]

Question 6: How frequently are higher priced hotel offers selected as the Top Position Offer over alternative, lower priced offers? In these cases (if any), what factor primarily determines why a higher priced offer is selected over a lower-priced offer?

[125]

Question 7: What percentage of listings had a Top Position Offer with the highest CPC of all offers within that listing? Further, how does CPC generally relate to offer price?

[129]

Question 8: What percentage of listings had a Top Position Offer with the cheapest price offer of all offers within that listing? What percentage of listings had a Top Position Offer within 1% or 5% of the cheapest offer of all offers within that listing?

[131]

Question 9: Considering only listings where the Top Position Offer was not the cheapest price offer of all offers within that listing, what percentage of the Top Position Offers had a CPC value higher than the cheapest offer? Further, what are the other factors by which the Top Position Offer and cheapest price offer differ?

[134]

FINDINGS IN RELATION TO CONSUMER BEHAVIOUR EVIDENCE

[146]

Evidentiary ruling

[146]

Professor Slonim’s evidence

[156]

FINDINGS IN RELATION TO ECONOMIC EVIDENCE

[160]

Evidentiary ruling

[160]

Mr Smith’s evidence

[168]

APPLICABLE PRINCIPLES

[178]

APPLICATION OF PRINCIPLES TO THE FACTS OF THIS CASE

[190]

Relevant class of consumers

[192]

The first relevant sub-period

[193]

Cheapest Price Representation

[196]

Strike-Through Representation

[206]

Top Position Representation

[212]

Additional conduct allegations

[223]

The second relevant sub-period

[226]

Strike-Through Representation

[227]

Top Position Representation

[233]

Additional conduct allegations

[244]

The third relevant sub-period

[249]

Strike-Through Representation

[250]

Red Price Representation

[255]

Top Position Representation

[262]

Additional conduct allegations

[264]

The fourth relevant sub-period

[265]

Red Price Representation

[266]

Top Position Representation

[274]

Additional conduct allegations

[277]

CONCLUSION

[278]

INTRODUCTION

1    The respondent, Trivago N.V. (Trivago), is incorporated in the Netherlands. It carries on business in Australia by conducting an online search and price comparison platform for travel accommodation.  Trivago uses the website address “www.trivago.com.au” for Australian consumers (the Trivago website).

2    The applicant (the ACCC) alleges that Trivago engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (the Australian Consumer Law). The ACCC also alleges that Trivago contravened ss 29 and 34 of the Australian Consumer Law (set out later in these reasons). The ACCC’s case relates to the period from 1 December 2016 to 13 September 2019 (the Relevant Period).

3    Trivago conducted a television advertising campaign in the first part of the Relevant Period. Many of these advertisements contained a statement to the effect that Trivago makes it easy “to find the ideal hotel for the best price”. For example, in one of the television advertisements, which was aired on Australian television networks between 10 January 2016 and 26 September 2017, the presenter (pictured below, in an image from the advertisement) stated as follows:

Have you ever looked for a hotel online?

Did you notice that there are so many different prices out there for the exact same room?

Trivago does the work for you and instantly compares the prices of over 600,000 hotels from over 200 different websites.

So, instead of searching for hours or spending too much, Trivago makes it easy for you to find the ideal hotel for the best price.

Just go to Trivago, type in where you want to go, and with two clicks select your check-in and check-out dates and search. It’s that simple.

Trivago searches hundreds of websites at the same time and shows you the most popular hotels. You can adjust the price so that it fits in with your budget, or select the number of stars, or filter by average guest ratings from over 100 million reviews.

Remember, Trivago shows you all the different prices …

for the exact same room, and that’s how you can be sure that you find your ideal hotel for the best price.

Hotel? Trivago

4    The landing page for the Trivago website (the Landing Page) displays the Trivago logo. During the first part of the Relevant Period, the logo was accompanied by the slogan: “Find your ideal hotel for the best price”. Later in the Relevant Period, this was changed to read: “Find your ideal hotel and compare prices from many websites”. The slogan was subsequently changed again, by replacing the word “many” with the word “different”.

5    Consumers visiting the Trivago website are prompted to enter a city or region in a search bar and select their desired dates and room type (eg, single, double, family or multiple rooms). Consumers are also able to search by hotel. When a consumer initiates a search in a given city or region, the Trivago website displays an initial set of search results for the city or region, stay dates and room type the consumer has selected (the Initial Search Results Page). For example, during the first part of the Relevant Period, the Initial Search Results Page appeared in the following format:

6    Each hotel listing on the Initial Search Results Page is displayed in substantially the same way, with the following features:

(a)    To the left, there is a square image relating to the particular hotel (typically, this is a photograph of one of the hotel’s rooms or of the hotel’s façade). (Although the image appears rectangular in the above picture, it is a square shape in the pictures set out later in these reasons.)

(b)    To the right of that image is the hotel’s name and beneath the name is information about the hotel, including its star rating, location and a user survey rating.

(c)    Further to the right, there are prices for the hotel as offered by online booking sites, online travel agencies and (sometimes) the hotel itself (referred to collectively as Online Booking Sites in these reasons). (Consistently with the way in which the case was presented by both parties, it will be convenient to refer to these prices as “offers”.) Further aspects are as follows:

(a)    In the far right column, one offer is displayed in green text, in a relatively large font (the Top Position Offer). The Top Position Offer is displayed together with the name of the Online Booking Site making that offer and a green “View Deal” click-out button.

(b)    Juxtaposed above the Top Position Offer is another offer displayed in red. During part of the Relevant Period, this offer was displayed in red strike-through text (the Strike-Through Price) (as depicted above). Subsequently, this offer was displayed in red text without the strike-through (the Red Price).

(c)    Three offers are displayed in the column that is second from the right. These appear in a smaller font compared with the Top Position Offer. These offers are referred to as the Second Position Offer, the Third Position Offer and the Fourth Position Offer.

(d)    Underneath the Second, Third and Fourth Position Offers, a “More Deals” button is displayed in bolded black text (the More Deals button). If clicked, the More Deals button shows, by way of a ‘slide-out’ function (the More Deals slide-out), other offers from Online Booking Sites for the selected hotel. In the first part of the Relevant Period, the More Deals button indicated the number of additional offers presented in the slide-out (as depicted above). Subsequently, the More Deals button was changed to indicate the lowest offer presented in the More Deals slide-out (eg, “More Deals from AU$226”).

7    If a consumer clicks on an Online Booking Site’s offer on the Trivago website, the consumer is taken to the Online Booking Site’s website and may complete the booking by using the Online Booking Site’s website’s booking service.

8    A number of changes were made to the Trivago website during the Relevant Period. In addition to the changes already referred to, the changes included the introduction of a number of ‘hover-overs’. If a consumer’s mouse cursor hovered over a particular part of the Initial Search Results Page, text would be displayed that provided additional information. Further details of the changes to the Trivago website during the Relevant Period are provided later in these reasons.

9    The ACCC alleges that Trivago made four representations at various times during the Relevant Period:

(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 Strike-Through Price was a comparison between prices offered for the same room category in the same hotel (the Strike-Through Representation); and

(d)    that the Red Price was a comparison between prices offered for the same room category in the same hotel (the Red Price Representation).

10    The ACCC also alleges 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).

11    Trivago admits the part of the ACCC’s case based on the Cheapest Price Representation. With respect to a portion of the Relevant Period, Trivago also admits the part of the ACCC’s case based on the Strike-Through Representation. However, the balance of the ACCC’s case is contested.

12    An important element of the ACCC’s case concerns the fact that Trivago’s contractual terms require Online Booking Sites to pay Trivago a fee, referred to as the Cost Per Click (CPC), if a consumer clicks on the Online Booking Site’s offer on the Trivago website. The CPC is payable whether or not the consumer makes a booking on the Online Booking Site’s website and is Trivago’s principal source of revenue. The CPC is not a fixed amount; rather, Trivago invites Online Booking Sites to submit “CPC bids” to Trivago. In order for the Online Booking Site’s offer to be displayed on the Trivago website, the CPC bid payable by the Online Booking Site must meet a minimum amount, which is determined by Trivago.

13    The ACCC alleges that Trivago selected the Top Position Offer primarily by reference to the value of the CPC Trivago would receive from the Online Booking Site in respect of the offer. Trivago disputes this and contends that the offer price was a more important factor than CPC in determining which offer was selected as the Top Position Offer. Both the ACCC and Trivago called computer science experts to express opinions on the algorithm used by Trivago to select the Top Position Offer (the Top Position algorithm). 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.

14    In relation to the Strike-Through Representation and the Red Price Representation, the ACCC alleges that, contrary to those representations, the Strike-Through Price (or the Red Price) often related to a more expensive room category than the Top Position Offer. There is no dispute that in some cases the Strike-Through Price did not relate to the same room category as the Top Position Offer.

15    For the reasons that follow, I have concluded, in summary, as follows:

(a)    that Trivago made each of the Cheapest Price Representation, the Top Position Representation, the Strike-Through Representation and the Red Price Representation during the periods alleged by the ACCC;

(b)    that in the making the Cheapest Price Representation, Trivago contravened ss 18 and 34 of the Australian Consumer Law;

(c)    that in making the Top Position Representation, the Strike-Through Representation and the Red Price Representation, Trivago contravened ss 18 and 29 of the Australian Consumer Law;

(d)    that Trivago engaged in the additional conduct described in [10] above in the period up to 2 July 2018; it is not established that Trivago engaged in that conduct during the balance of the Relevant Period; and

(e)    that in engaging in the additional conduct described in [10] above in the period up to 2 July 2018, Trivago contravened ss 18 and 34 of the Australian Consumer Law.

THE ORIGINATING APPLICATION, THE CONCISE STATEMENT AND THE CONCISE RESPONSE

16    The ACCC’s allegations are set out in its further amended originating application (the Originating Application) and its further amended concise statement (the Concise Statement). Trivago’s response is set out in its concise response to the further amended concise statement (the Concise Response).

17    In the Originating Application and the Concise Statement, the ACCC makes allegations that relate to a period up to “the present”. However, in the course of the trial I proposed, and the ACCC accepted, that the period of the allegations should conclude on the last day of the trial, which was 13 September 2019. The Relevant Period is, therefore, from 1 December 2016 to 13 September 2019. The ACCC’s allegations relate to the following four sub-periods within the Relevant Period:

(a)    the period from 1 December 2016 to 29 April 2018 (the first relevant sub-period), a period of approximately 17 months;

(b)    the period from 29 April 2018 to 20 November 2018 (the second relevant sub-period), a period of approximately seven months;

(c)    the period from 20 November 2018 to 13 February 2019 (the third relevant sub-period), a period of approximately three months; and

(d)    the period from 13 February 2019 to 13 September 2019 (the fourth relevant sub-period), a period of approximately seven months.

18    Consistently with the approach taken by the parties, the website during the first relevant sub-period will be referred to as website version 1, the website during the second relevant sub-period will be referred to as website version 2, the website during the third relevant sub-period will be referred to as website version 3 and the website during the fourth relevant sub-period will be referred to as website version 4. It should be noted that the appearance of the website was not necessarily static within each sub-period; on some occasions, as detailed below, changes were made within a sub-period.

19    In its Originating Application and Concise Statement, the ACCC refers to online booking sites, online travel agents and participating hotels as “advertisers”. However, I prefer to use the term “Online Booking Sites” to refer to the entities that make offers for hotel accommodation that are displayed on the Trivago website. That is because I consider it unlikely that consumers using the Trivago website would consider those entities to have placed advertisements on the Trivago website; rather, consistently with Trivago’s marketing, I consider it likely that consumers would see the Trivago website as aggregating offers for hotel accommodation and providing a price comparison service in relation to such offers. Accordingly, I prefer to use the term “Online Booking Sites”.

20    A convenient reference point for the ACCC’s allegations in this proceeding is the declarations it seeks, as set out in the Originating Application. I will therefore first summarise the declarations sought by the ACCC in the Originating Application, and then refer to some of the further allegations set out in the Concise Statement.

21    In relation to the Cheapest Price Representation, the ACCC seeks a declaration to the effect that, in the first relevant sub-period, Trivago, in trade or commerce, engaged in conduct that was:

(a)    misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    liable to mislead the public as to the nature, characteristics and/or suitability for purpose of the accommodation services displayed on the Trivago website in contravention of s 34 of the Australian Consumer Law,

by representing in online and television advertising that the Trivago website would quickly and easily identify the cheapest rates available for a hotel room responding to a consumer’s search (referred to in these reasons as the “Cheapest Price Representation), when in fact the Trivago website did not enable consumers to quickly or easily identify the cheapest rates available for particular hotel rooms.

22    In relation to the Top Position Representation, the ACCC seeks a declaration to the effect that, during the Relevant Period (i.e. all four sub-periods), Trivago, in trade or commerce:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    in connection with the supply of accommodation services, made false or misleading representations with respect to the price of those services in contravention of s 29(1)(i) of the Australian Consumer Law,

by:

(c)    prominently displaying on the Trivago website, Top Position Offers (which were sometimes accompanied by boxes identifying them as “Top Deals” or depicting a percentage saving) and thereby representing 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 (referred to in these reasons as the “Top Position Representation), when in fact:

(a)    the Top Position Offers were not always the cheapest available offers for an identified hotel;

(b)    Trivago did not select the Top Position Offers by reference to any other characteristic which may have made them the most attractive offer; and

(c)    Trivago selected the Top Position Offers primarily by reference to the CPC payment Trivago would receive from the Online Booking Site that submitted the offer if a consumer clicked on the offer.

23    In relation to the Strike-Through Representation, the ACCC seeks a declaration to the effect that, during the first and second relevant sub-periods, Trivago, in trade or commerce:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    in connection with the supply of accommodation services, made false or misleading representations with respect to the price of those services in contravention of s 29(1)(i) of the Australian Consumer Law,

by displaying the Strike-Through Price above the Top Position Offers on the hotel listing display and the map portion of the Trivago website, and thereby representing that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel (referred to in these reasons as the “Strike-Through Representation), when in fact the Strike-Through Price that Trivago displayed often related to a more expensive room category than the Top Position Offer.

24    In relation to both the Strike-Through Representation and the Red Price Representation, the ACCC seeks a declaration to the effect that, during the third relevant sub-period, Trivago, in trade or commerce:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    in connection with the supply of accommodation services, made false or misleading representations with respect to the price of those services in contravention of s 29(1)(i) of the Australian Consumer Law,

by:

(c)    displaying the Red Price above the Top Position Offers on the hotel listing display, and thereby representing that the Red Price was a comparison between prices offered for the same room category in the same hotel (referred to in these reasons as the “Red Price Representation) when in fact the Red Price that Trivago displayed often related to a more expensive room category than the Top Position Offer; and

(d)    displaying the Strike-Through Price above the Top Position Offers on the map portion of the Trivago website, and thereby representing that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel (referred to in these reasons as the “Strike-Through Representation), when in fact the Strike-Through Price that Trivago displayed often related to a more expensive room category than the Top Position Offer.

25    Further, in relation to the fourth relevant sub-period, the ACCC seeks a declaration to the effect that Trivago, in trade or commerce:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    in connection with the supply of accommodation services, made false or misleading representations with respect to the price of those services in contravention of s 29(1)(i) of the Australian Consumer Law,

by displaying the Red Price above the Top Position Offers, and thereby representing that the Red Price was a comparison between prices offered for the same room category in the same hotel (referred to as the “Red Price Representation), when in fact the Red Price that Trivago displayed often related to a more expensive room category than the Top Position Offer.

26    The ACCC also seeks three declarations in relation to the additional conduct allegations. In relation to the first relevant sub-period, the ACCC seeks a declaration to the effect that Trivago, in trade or commerce engaged in conduct that was:

(a)    misleading or deceptive or likely to mislead or deceive in contravention of s 18 of the Australian Consumer Law; and

(b)    liable to mislead the public as to the nature, characteristics and/or suitability for purpose of the accommodation services displayed on Trivago’s website in contravention of s 34 of the Australian Consumer Law,

by making the Cheapest Price Representation, and by making Top Position Offers together with the Top Position Representations and the Strike-Through Representation, and thereby leading 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 when, in fact, the Trivago website:

(c)    did not enable consumers to quickly or easily identify the cheapest prices available for a particular hotel room; and

(d)    directed consumers to more prominently displayed offers made by Online Booking Sites that offered to make higher CPC payments to Trivago than competing Online Booking Sites each time a consumer clicked on the offer, irrespective of the prices offered to consumers for a particular hotel room.

27    In relation to the second and third relevant sub-periods, the ACCC seeks a declaration in similar terms, save that, rather than relying on the Cheapest Price Representation (which is alleged only in respect of the first relevant sub-period), the ACCC relies on Trivago making Top Position Offers on the Trivago website, making the Top Position Representation, making the Strike-Through Representation, and:

advertising the Trivago website using statements such as: “Compare over 250 booking sites and find the ideal hotel at the best price!”; “find your ideal hotel and compare prices from different websites”; “impartial comparison”; “find the ideal hotel at a great price”; and “Compare & Save. No Ads or Pop-Ups”.

28    In relation to the fourth relevant sub-period, the declaration sought is similar to that sought in respect of the second and third relevant sub-periods. The ACCC relies on Trivago making Top Position Offers on the Trivago website, making the Top Position Representation, making the Red Price Representation, and

advertising the Trivago website using statements such as: “Find your ideal hotel and compare prices from different websites”; “impartial comparison”; “find the ideal hotel at a great price”; and “Compare & Save. No Ads or Pop-Ups”.

29    The ACCC’s case is developed in the Concise Statement. I will focus on the allegations in the Concise Statement that go beyond those already apparent from the declarations sought in the Originating Application. In relation to the Top Position Representation, the Concise Statement includes the following allegations:

12    Contrary to the Top Position Representation, the Top Position Offer was not always the cheapest available offer and Trivago did not select it by reference to any other characteristic which may have made it the most attractive offer. Trivago selected the Top Position Offer primarily by reference to the value of the CPC Trivago would receive from the advertiser who submitted the offer.

13    Trivago used an algorithm to determine the Top Position Offer. The algorithm placed a significant weighting on the value of an advertiser’s CPC bid. By applying the algorithm, Trivago gave greater prominence to offers from advertisers who had submitted higher CPC bids than to cheaper offers at the same hotel from advertisers who submitted lower CPC bids. In addition, from at least May 2017 to at least October 2017, Trivago set a minimum CPC amount. If an advertiser submitted a CPC bid below this amount, the algorithm prevented the Trivago website from displaying the advertiser’s offer, even if it was the cheapest price offer Trivago had received. The result was that often the Top Position Offer was not the cheapest price offer Trivago had received for the relevant hotel.

15    Beneath the Fourth Position [Offer], Trivago displayed a “more deals” button. Clicking on this button opened a list of other offers which advertisers had submitted for the same hotel. From at least May 2017 to at least October 2017, the “more deals” button did not display the cheapest price offer which Trivago had received for that hotel. In addition (as set out in paragraph 13) if an advertiser made a CPC bid that was less than a predetermined minimum, Trivago did not display the advertiser’s offer on its website at all, even if it was the cheapest price offer Trivago had received for the hotel. From a date not before October 2017, Trivago changed the “more deals” button to display the cheapest offer it had received and introduced a mouse over information button in respect of the top position algorithm. These changes did not affect the Top Position Representation.

30    The Concise Statement also includes the following allegation:

19    By making the Strike-Through Representation and the Red Price Representation (separately or in combination) [and] by displaying the Percentage Saving or Top Deal box next to the Top-Position Offer, Trivago reiterated and reinforced the Top Position Representation. One effect of this was that consumers (especially those who had viewed advertising in which Trivago made the Cheapest Price Representation) were less likely to open the “more deals” list, even after Trivago amended the button to identify that cheaper price offers were available. The ACCC refers to the information contained in confidential Annexure 3.

In confidential annexure 3 to the Concise Statement, the ACCC compares the number of visits to the Trivago website in which a consumer clicked on an offer located in the More Deals slide-out with the number of visits in which a consumer clicked on a Top Position Offer. The figures provided in confidential annexure 3 relate to the period from 1 December 2016 to 3 January 2018. It suffices to say that during this period the latter figure was much higher than the former.

31    In relation to the additional conduct allegations (i.e. the subject-matter of the last three declarations sought in the Originating Application), the Concise Statement includes the following allegations:

20    By:

(a)    the advertising alleged in paragraphs 4 to 7, and by prominently displaying offers on the Trivago website as alleged in paragraphs 9 to 19 (including making the Top Position and Strike Through Representations) during the first relevant sub-period (First Price Comparison Conduct);

(b)    the advertising alleged in paragraphs 6 and 8A, and by prominently displaying offers on the Trivago website during the second relevant sub-period as alleged in paragraphs 9 to 19 (including making the Top Position and Strike Through Representations) (Second Price Comparison Conduct);

(c)    the advertising alleged in paragraphs 6 and 8A, and by prominently displaying offers on the Trivago website during the third relevant sub-period as alleged in paragraphs 9 to 19 (including making the Top Position, Strike-Through Representation and Red Price Representations) (Third Price Comparison Conduct); and/or

(d)    the advertising alleged in paragraphs 6 and 8A, and by prominently displaying offers on the Trivago website during the fourth relevant sub-period as alleged in paragraphs 9 to 19 (including making the Top Position and Red Price Representations) (Fourth Price Comparison Conduct),

Trivago engaged in conduct that led or was likely to lead consumers to believe that Trivago’s website provided an impartial, objective and transparent price comparison which would enable consumers to quickly and easily identify the cheapest available offer for a particular (or the “exact same”) room at a particular hotel. In fact Trivago’s website (a) did not enable consumers to quickly or easily identify the cheapest prices available for a particular hotel room; and (b) directed consumers to more prominently displayed offers made by advertisers which had made higher CPC bids than competing advertisers, irrespective of the prices offered to consumers.

32    I turn now to the Concise Response. The Concise Response includes the following description of Trivago’s business:

5.    trivago acts as a metasearch site and not as a direct booking site. trivago’s primary function is to aggregate and compare accommodation offers from different online booking sites in a manner that consumers find helpful. The booking sites appearing on trivago’s website include participating hotels and online travel agencies. If a consumer clicks on the booking site’s offer on the trivago website, the consumer is taken to the booking site’s online booking service and completes the booking using the booking site’s service. trivago does not provide the booking service.

6.    trivago’s contractual terms require booking sites to pay trivago a fee if a consumer clicks on the booking site’s offer on the trivago website (referred to as the “cost-per-click” or “CPC”). The CPC is trivago’s principal source of revenue. trivago does not charge fees to consumers who use its service.

7.    trivago’s business offers booking sites a marketplace on which to advertise their hotel offers. The CPC payable by the booking site to trivago to advertise their hotel offer is the amount bid by the booking site on trivago’s marketplace, subject to a minimum CPC determined by trivago.

33    The Concise Response describes changes that were made to the Trivago website during the Relevant Period. Many of these matters are reflected in the parties’ statement of agreed facts, referred to later in these reasons.

34    The Concise Response includes certain admissions by Trivago. The relevant sections of the Concise Response are in the following terms:

C.    Lowest rate statements

24.    trivago admits that during the following periods, it described and marketed its Australian website in the following mediums and using statements to the following effect:

(a)    between 1 December 2016 and 4 January 2018, as alleged by the ACCC, the trivago website stated:

Find your ideal hotel for the best price”;

and

With trivago you can easily find your ideal hotel at the lowest rate. Simply enter where you want to go and your desired travel dates and let our hotel search engine compare accommodation prices for you.”;

(b)    between 1 December 2016 and 19 June 2017, as alleged by the ACCC, trivago caused the following statements to be made in the snippet which appeared beneath the Google search results displayed when Australian consumers conducted an online search for trivago:

Compare over 250 booking sites and find the ideal hotel at the best price!”;

and

Compare hotels, find the cheapest price and guarantee the best deal on accommodation...”;

(c)    between 28 August 2016 and 29 May 2017, as alleged by the ACCC, trivago caused a television advertisement to be aired on television networks in Australia on 10,933 occasions stating:

...there are so many different prices all over the internet. And trivago instantly compares them all to find your ideal hotel for the best price.”;

(d)    from 13 January 2017 to 29 May 2017, as alleged by the ACCC, trivago caused television advertisements to be aired on television networks in Australia on 4,761 occasions containing the following statements:

trivago makes it easy for you to find the ideal hotel for the best price”;

and

You can be sure that you can find your ideal hotel at the best price”;

and

Remember, trivago shows you all the different prices for the exact same room. And that’s how you can be sure that you find your ideal hotel for the best price.

25.    trivago admits that the statements referred to in paragraph 24 (lowest rate statements) conveyed to ordinary consumers that:

   (a)    the trivago website is easy to use; and

(b)    the trivago website assists consumers in finding their ideal hotel accommodation at the lowest rates advertised by a wide range of booking sites through the trivago website for that hotel on the relevant stay dates.

26.    trivago says that, at all relevant times:

   (a)    the trivago website has been easy to use; and

(b)    the trivago website has in fact assisted consumers in finding their ideal hotel accommodation at the lowest rates advertised by a wide range of booking sites through the trivago website for that hotel on the relevant stay dates.

27.    However, for the purposes of this proceeding, trivago admits that:

(a)    while the Initial Search Page Offers were selected by trivago from the lowest rates advertised by those booking sites on the trivago website for that hotel on the relevant stay dates, those rates were not always the lowest rates advertised on the trivago website for that hotel on the relevant stay dates;

(b)    the lowest rate statements may have caused some consumers to form an erroneous belief that the Initial Search Page Offers were the lowest rates advertised on the trivago website for that hotel on the relevant stay dates; and

(c)    to that extent, during the relevant period until 29 April 2018, trivago engaged in conduct in contravention of s 18 and s 34 of the Australian Consumer Law (ACL).

28.    As noted above, from on or about 29 April 2018, trivago ceased making the lowest rate statements.

D    Strike through pricing

29.    trivago admits that, during the relevant period until on or about 20 November 2018, in response to a consumer search for accommodation in a particular region on particular stay dates, the initial search results page on trivago’s website displayed, in respect of each hotel listed:

(a)    a Strike-Through Price with a “hover-over” which stated: “This is the cheapest deal from the most expensive booking site with offers for this hotel on your stay dates.”; and

(b)    in the circumstances referred to earlier, a Percentage Savings box and a Top Deal box.

30.    For the purposes of this proceeding, trivago admits that:

(a)    while the Strike-Through Price for each hotel listed on the initial search results page was the lowest rate from the most expensive booking site with offers for that hotel on the relevant stay dates, the room rate did not always relate to the same room category as the Top Position Offer;

(b)    by displaying the Strike-Through Price next to the Top Position Offer in the form it was displayed (using a “strike-through” notation) either on its own or in conjunction with the Percentage Savings box and the Top Deal box, trivago may have caused some consumers to form an erroneous belief that the Top Position Offer and the Strike-Through Price were offers for rooms in the same room category; and

(c)    to that extent, by displaying the Strike-Through Price next to the Top Position Offer in the form it was displayed during the relevant period until on or about 20 November 2018 either on its own or in conjunction with the Percentage Savings box and the Top Deal box, trivago engaged in conduct in contravention of s 18 and s 29(1)(i) of the Australian Consumer Law (ACL).

31.    As noted above, from on or about 20 November 2018, trivago altered the “hover-over” in respect of the Strike-Through Price to state that the price may relate to a room type or amenities package that differs from other offers on the site.

32.    Further, from on or about 20 November 2018, trivago ceased using the “strike-through” notation and also removed the Percentage Savings box and the Top Deals box.

THE HEARING

35    The hearing, which was a trial on liability only, occupied five days.

36    The ACCC called two witnesses:

(a)    Professor Robert Slonim, a Professor in the School of Economics, Faculty of Arts and Social Sciences, University of Sydney; and

(b)    Mr Victor Bajanov, who holds the position of Executive, Product Analytics at Quantium, which is a global data and analytics firm headquartered in Sydney.

37    There was an objection to the whole of Professor Slonim’s report. I ruled that certain parts of the report should not be received into evidence and that the balance of the report should be received, and said that I would provide my reasons later, in this judgment. My reasons for this ruling are set out later in these reasons.

38    Trivago called two witnesses:

(a)    Professor David Parkes, a Professor in the School of Engineering and Applied Sciences, Harvard University; and

(b)    Mr Patrick Smith, a partner at RBB Economics.

Trivago did not call any of its officers or employees to give evidence.

39    There was an objection to the whole of Mr Smith’s report. I ruled that certain parts of the report were inadmissible and that the balance of the report should be received into evidence, again indicating that I would provide my reasons later, in this judgment. My reasons for this ruling are set out later in these reasons.

40    Mr Bajanov and Professor Parkes prepared a joint report. They gave evidence concurrently.

41    The parties prepared and tendered a statement of agreed facts.

42    The ACCC relied on a number of documents (including videos of television advertisements) contained in the Court Book. All but two of these documents were admitted without objection. However, in relation to two of the documents, the ACCC sought to rely on certain parts of the documents as admissions under s 81 of the Evidence Act 1995 (Cth), and Trivago objected. The two documents are: a letter from King & Wood Mallesons, the solicitors for Trivago, to the ACCC dated 28 September 2017 (the KWM September 2017 letter); and attachment A to Trivago’s response dated 22 February 2018 to a notice served by the ACCC under s 155 of the Competition and Consumer Act (Trivago’s Response to the ACCC). I indicated that I would rule on this issue in the course of my judgment. I deal with this issue later in these reasons.

FACTUAL FINDINGS

43    The following factual findings are based on the statement of agreed facts and the other documents admitted into evidence.

Trivago

44    Trivago is incorporated in the Netherlands and is a foreign corporation within the meaning of s 4 of the Competition and Consumer Act.

45    Trivago carries on business in Australia within the meaning of s 5 of the Competition and Consumer Act by conducting an online search and price comparison platform for travel accommodation, namely the Trivago website.

Trivago’s advertising and marketing

46    During the Relevant Period, Trivago used a number of advertising mediums to advertise its website to Australian consumers.

47    Trivago caused a number of television advertisements to be aired on Australian television networks:

(a)    between 28 August 2016 and 29 May 2017, Trivago caused a television advertisement to be aired on television networks in Australia stating:

there are so many different prices all over the internet. And Trivago instantly compares them all to find your ideal hotel for the best price

(b)    from 13 January 2017 to 29 May 2017, Trivago caused television advertisements to be aired on television networks in Australia containing the following statements:

Trivago makes it easy for you to find the ideal hotel for the best price …

You can be sure that you can find your ideal hotel at the best price …

Remember, Trivago shows you all the different prices for the exact same room. And that’s how you can be sure that you find your ideal hotel for the best price

(c)    between 20 December 2016 and 2 July 2018, Trivago caused television advertisements to be aired, which included the following statement:

and that’s one more way Trivago helps you find your ideal hotel at the best price.

48    The television advertisement described in [3] above was aired on Australian television networks between 10 January 2016 and 26 September 2017: see the description in the Court Book index of the document at Court Book tab 14.

49    In the period 29 June 2017 to 1 April 2018, a television advertisement with the following text was aired on Australian television networks (see the description in the Court Book index of the document at Court Book tab 33):

Did you notice that there are so many different prices out there for the exact same room?

I know Ive been asking this a lot lately, but this is what it really means. The same hotel room can have up to ten different prices across the internet. So even if you spend a lot of time looking around, chances are, it is still out there for a better price. So make one last check before you book, the Trivago check.

Trivago compares prices from more than 200 websites to make sure you find your ideal hotel for the best price.

Hotel? Trivago

50    In the period between 19 December 2017 and 1 April 2018, a television advertisement with the following text was aired on Australian television networks (see the description in the Court Book index of the document at Court Book tab 36):

There are plenty of booking websites. Your ideal hotel may only be listed on one, or on several, but for very different prices. Do you really want to check them all?

Instead, use Trivago to compare these offers and find your ideal hotel for the best price.

Hotel? Trivago

51    I note that the television advertisements identified in the preceding paragraphs did not constitute the entirety of Trivago’s television advertisement campaign. Indeed, the Court Book contains 24 video clips of television advertisements that were broadcast during various parts of the first and second relevant sub-periods.

52    Between 1 December 2016 and on or around 19 June 2017, Trivago caused the following statements to be made in a ‘snippet’ which appeared beneath Google search results displayed when Australian consumers conducted a search for “Trivago”:

Compare over 250 booking sites and find the ideal hotel at the best price!

Compare hotels, find the cheapest price and guarantee the best deal on accommodation …

The Trivago website

53    Trivago’s business involves aggregating accommodation offers made by different Online Booking Sites, and displaying some of these offers on the Trivago website. The Trivago website interacts with the Online Booking Sites’ databases and displays accommodation offers in response to consumers’ searches.

54    If a consumer clicks on an Online Booking Site’s offer on the Trivago website, the consumer is taken to the Online Booking Site’s website and may complete the booking by using the Online Booking Site’s website’s booking service. Trivago’s contractual terms require Online Booking Sites to pay Trivago a fee (the CPC) if a consumer clicks on the Online Booking Site’s offer on the Trivago website. The CPC is payable whether or not the consumer makes a booking on the Online Booking Site’s website and is Trivago’s principal source of revenue. In order for an Online Booking Site’s offer to be displayed on the Trivago website, the CPC bid payable by the Online Booking Site must meet a minimum amount, which is determined by Trivago.

55    Trivago does not charge fees to consumers to access its website. The CPC payable by the Online Booking Site to Trivago is the amount bid by the Online Booking Site directly to Trivago on Trivago’s marketplace. Consumers are not informed by Trivago of the fact that Online Booking Sites pay a cost per click to Trivago, nor of the amount of the CPC payable by any Online Booking Site.

56    Consumers visiting the Trivago website are prompted to enter a city or region in a search bar and select their desired dates and room type, as described in [5] above.

57    Each hotel listing on the Initial Search Results Page is displayed in substantially the same way, with the features described in [6] above.

58    For part of the Relevant Period, some hotel listings on the Initial Search Results Page also had the following features:

(a)    until about 20 November 2018, if the Top Position Offer was at least 20% lower than the Strike-Through Price, the percentage difference was displayed in a red box above the Top Position Offer (Percentage Savings box); and

(b)    until about 6 August 2018, if, among other factors, the Top Position Offer was at least 20% lower than the Strike-Through Price, the hotel had a rating of at least three stars and the hotel met Trivago’s internal rating index for quality, the words “Top Deal” were displayed in a red box above the Top Position Offer (Top Deal box).

59    Above the hotel listings on the Initial Search Results Page appears a “Sort by” filter which allows consumers to specify the sorting parameters for the hotel listings (the Sort By Filter). The current default Sort By Filter is “Our recommendations”. Other Sort By Filters include “Rating only”, “Price only” and “Distance only”.

60    Additional filtering tools are available to consumers who want to exclude offers on the Initial Search Results Page, including a price per night scrolling bar (where consumers can set the maximum cost per night), accommodation type (for example, hotel or house/apartment) and hotel location (for example, number of kilometres from city centre).

61    For part of the Relevant Period, the Sort By Filter also had the following further features:

(a)    since about 6 October 2017, an information button in the form of an ‘ihas appeared directly next to the words “Our recommendations” (the Our Recommendations information button). (See [26(b)] of the statement of agreed facts; cf [17] of the statement of agreed facts.) If a consumer’s mouse cursor hovers over the Our Recommendations information button, text containing information in relation to the ranking results (as detailed below) will appear; and

(b)    since about 17 April 2019, directly next to the Our Recommendations information button, the words “How payments to us affect ranking” have appeared.

The first relevant sub-period (1 December 2016 to 29 April 2018)

62    In the period from about 1 December 2016 to 4 January 2018, the slogan beneath the logo on the Landing Page read: “Find your ideal hotel for the best price”. Further below, under the heading “Find cheap hotels on trivago, appeared the statement:

With trivago you can easily find your hotel at the lowest rate. Simply enter where you want to go and your desired travel dates and let our hotel search engine compare accommodation prices for you.

(Emphasis in original.)

63    As at 4 January 2018, the top part of the Landing Page appeared as follows:

64    Prior to 12 April 2018, another slogan appeared on the Trivago website. This read: “Find your ideal hotel and compare prices from many websites”. From on or about 12 April 2018, the slogan was amended to state: “Find your ideal hotel and compare prices from different websites”.

65    The statement of agreed facts includes various screenshots of website version 1 (although it should be noted that there were changes to the website during the course of the first relevant sub-period, as detailed below). One of these screenshots has been set out at [5] above. The statement of agreed facts also includes the following screenshots of individual hotel listings from website version 1. (I note that some, but not all, of the screenshots have figure numbers and descriptions.)

____________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

__________________________________________________________________________

66    In response to a consumer search, website version 1 generated an Initial Search Results Page containing a number of individual hotel listings, each of which displayed:

(a)    the Top Position Offer in the column furthest to the right. The Top Position Offer was the most prominently displayed offer for the hotel. It was displayed together with the Online Booking Site’s name and a green “view deal” click-out button. In addition, some hotel listings on the Initial Search Results Page displayed a box underneath the Top Position Offer showing that the Top Position Offer had particular attributes including, for example, “Pay at the hotel” or “Free cancellation”;

(b)    the Strike-Through Price in red, strike-through text above the Top Position Offer;

(c)    the Second, Third and Fourth Position Offers in smaller size text (compared with the Top Position Offer and Strike-Through Price). These offers were displayed less prominently than the Top Position Offer and were contained in one column;

(d)    the More Deals button, with bolded black text indicating (until about 5 December 2017) the number of further offers contained in the More Deals slide-out (e.g. “More deals: 22”);

(e)    the Percentage Savings box (if the conditions referred to in [58(a)] above were met); and

(f)    the Top Deal box (if the conditions referred to in [58(b)] above were met).

67    Between May 2017 and January 2018, the Trivago website displayed the Strike-Through Price as the Fourth Position Offer (in addition to it appearing directly above the Top Position Offer). In or around January 2018, the Strike-Through Price ceased to be shown as the Fourth Position Offer.

68    In addition, during the first relevant sub-period, the following changes were made to the Initial Search Results Page:

(a)    on or about 5 December 2017, the More Deals button on Trivago’s desktop website ceased to include the text indicating the numbers of further offers contained within the More Deals slide-out; instead, the bolded black text was changed to read “More deals from AU$...” and displayed the price of the cheapest deal contained in the More Deals slide-out (e.g. “More deals from AU$226”);

(b)    on or about 6 October 2017, the Trivago website began displaying the Our Recommendations information button with a hover-over. If a consumer’s mouse cursor hovered over the Our Recommendations information button, the hover-over would display text stating (see p 24 of the statement of agreed facts):

trivago gives you the opportunity to compare different offers for hotel rooms that are available through trivago’s website. In some cases, lower prices might be available from other sources. In determining the price to display in the leading position of our search results, we consider a variety of factors, including price, the likelihood that you will find your ideal hotel, your ability to complete a booking after you click on a search result and the level of compensation provided by the booking sites we cover. In order to make more information available on pricing options to our users, additional prices are listed in the “More deals” slide-out.

(c)    from about 27 January 2018, the text displayed if a consumer’s mouse cursor hovered over the Our Recommendations information button stated:

The ranking results reflect your search criteria and our assessment of the attractiveness of the offer compared to other offers available on our site. It also reflects the compensation paid by the booking site.

(d)    on or about 29 March 2018, a hover-over was added in respect of the Strike-Through Price. If a consumer’s mouse cursor hovered over the Strike-Through Price, the following text was displayed:

The strike-through price corresponds to the cheapest offer we received from the most expensive booking site on trivago for this hotel and your stay dates.

(e)    on or about 29 March 2018, a hover-over was added for the Percentage Savings box (which was displayed if the conditions in [58(a)] above were met). If a consumer’s mouse cursor hovered over the Percentage Savings box, the following text was displayed:

This figure represents the difference between the strike-though deal price and the featured deal price.

(f)    on or about 29 March 2018, a hover-over was added for the Top Deal box (which was displayed if the conditions in [58(b)] above were met). If a consumer’s mouse cursor hovered over the Top Deal box, the following text was displayed:

This deal is at least 20% cheaper than the strike-through deal price and its trivago Rating Index is above 7.5.

The second relevant sub-period (29 April 2018 to 20 November 2018)

69    Since 12 April 2018 (i.e. just before the start of the second relevant sub-period), the words on the Landing Page have read: “Find your ideal hotel and compare prices from different websites”. During the second, third and fourth relevant sub-periods, the Landing Page therefore appeared as follows:

70    The statement of agreed facts includes a number of screenshots of website version 2.

71    In response to a consumer search, the Initial Search Results Page in website version 2 displayed the same features set out in [66]-[68] above.

72    However, during the second relevant sub-period, the following changes to the Initial Search Results Page occurred:

(a)    in or around August 2018, the text displayed if a consumer’s mouse cursor hovered over the Strike-Through Price was amended to state:

This is the cheapest deal from the most expensive booking site with offers for this hotel on your stay dates.

(b)    on or about 6 August 2018, the Top Deal box was removed from the Trivago website.

73    In addition, website version 2 had the following new features:

(a)    from about 3 July 2018, information about Trivago’s algorithm and ranking of offers on the Initial Search Results Page was provided to consumers under the link “Learn how trivago works”; and

(b)    in about October 2018, the text displayed if a consumer’s mouse cursor hovered over the Our Recommendations information button was amended to include a hyperlink to that “Learn how trivago works” page. Consumers who clicked on that link were taken to a new page on the Trivago website that stated:

How does trivago determine the ‘our recommendations’ sort?

The ‘our recommendations’ feature is based on a dynamic algorithm that shows you a range of attractive and relevant offers we think you’re going to love. In the ‘top position’ we display in green the offer which our algorithm recommends as a great offer. Our algorithm takes into account a number of relevant factors, such as your search criteria (for example your location and stay dates), the offer’s price, and its general attractiveness – for example the experience we think you’ll likely have on the displayed booking site. We also take into account the compensation booking sites provide us with when a user clicks on an offer.

To the left of the ‘top position’ offer and/or under the ‘more deals from’ tab, we display additional offers to allow you to compare other deals for the same hotel. You may find offers under the ‘more deals from’ slide-out section with a lower price than the ‘top position’ offer. While price is an important factor when selecting our ‘top position’ offer, we believe other factors, such as those mentioned above, make offers attractive and relevant to you, and contribute to high levels of satisfaction by our users.

Ultimately, our mission is to give you the information and tools to help you find your ideal hotel.

The third relevant sub-period (20 November 2018 to 13 February 2019)

74    The statement of agreed facts includes a number of screenshots of website version 3. These include the screenshot below.

75    In response to a consumer search, the Initial Search Results Page in website version 3 displayed:

(a)    the Top Position Offer in the column furthest to the right. The Top Position Offer was the most prominently displayed offer on the Trivago website. It was displayed together with the Online Booking Site’s name and a green “view deal” click-out button. In addition, some hotel listings on the Initial Search Results Page displayed a box underneath the Top Position Offer showing that the Top Position Offer had particular attributes including, for example, “Pay at the hotel” or “Free breakfast”;

(b)    (for some of the hotel listings only) a Red Price from identified Online Booking Sites in smaller text above the Top Position Offer with a hover-over. If a consumer’s mouse cursor hovered over the Red Price, the following text was displayed:

For your stay dates, this is the cheapest deal from the most expensive booking site with offers for this hotel. It may relate to a room type or amenities package that differs from other offers on our site.

(c)    the Second, Third and Fourth Position Offers in smaller size text (compared with the Top Position Offer) to the left of the Top Position Offer. These offers were displayed less prominently than the Top Position Offer and were contained in one column;

(d)    the More Deals button as described in [68(a)] above; and

(e)    the Our Recommendations information button as set out in [68(c)] and [73(b)] above.

76    Website version 3 did not include the following features:

(a)    the Strike-Through Price (save to the extent the Strike-Through Price continued to appear in the map portion of the Trivago website);

(b)    the Percentage Savings box; and

(c)    the Top Deal box.

77    On or about 14 January 2019, it came to Trivago’s attention that the words “best price” appeared in a subset of Google unpaid Trivago-related search results in Australia. To produce its unpaid search results, Google crawls internet pages, including the metadata of those pages. Although Trivago updated the metadata of the Trivago website, Trivago inadvertently did not update the metadata of the pages for individual hotels on the Trivago website. As a result, Google.com.au unpaid search results for individual hotels (e.g., for a Trivago listing for the Hilton in Sydney) included a snippet that included the words “best price”. Trivago subsequently updated the metadata for these pages. This error did not affect Trivago’s paid advertisements or its other unpaid listings on Google.

The fourth relevant sub-period (13 February to 13 September 2019)

78    On or about 13 February 2019, it came to Trivago’s attention that strike-through prices continued to appear on the map portion of the Trivago website. When searching for hotels in a particular location, a user can select an option to view a map that includes relevant offers. The map was inadvertently not updated and, as a result, strike-through prices continued to be displayed when users hovered over price symbols on the map. Trivago removed these strike-through prices promptly after becoming aware of this issue. Therefore, during the fourth relevant sub-period, the Strike-Through Price no longer appeared in the map portion of the Trivago website.

79    The statement of agreed facts includes a number of screenshots of website version 4. These include the screenshot below.

80    In response to a consumer search, the Initial Search Results Page for website version 4 displayed the same features set out in [75] above.

81    In addition, since about 17 April 2019, website version 4 added the following words next to the Our Recommendations information button: “How payments to us affect ranking”. The hover-over accompanying the Our Recommendations information button continued to read as set out in [68(c)] and [73(b)] above.

The KWM September 2017 letter and Trivago’s Response to the ACCC

82    As noted above, the ACCC sought to rely on certain parts of the KWM September 2017 letter and Trivago’s Response to the ACCC as admissions under s 81 of the Evidence Act, and Trivago objected. The parts of each document that the ACCC sought to rely on in this way were identified in a document handed up by senior counsel for the ACCC. I indicated that I would rule on this issue in the course of my judgment. In the meantime, and subject to that ruling, the documents were admitted into evidence on a limited basis (pursuant to s 136 of the Evidence Act), namely that they were received as evidence of what Trivago said to the ACCC (as distinct from evidence of the truth of the contents of the documents).

83    Section 81 (excluding the Note and the Example) provides as follows:

81    Hearsay and opinion rules: exception for admissions and related representations

(1)    The hearsay rule and the opinion rule do not apply to evidence of an admission.

(2)    The hearsay rule and the opinion rule do not apply to evidence of a previous representation:

(a)    that was made in relation to an admission at the time the admission was made, or shortly before or after that time; and

(b)    to which it is reasonably necessary to refer in order to understand the admission.

84    The word “admission” is defined in the Dictionary to the Evidence Act as follows:

admission means a previous representation that is:

(a)    made by a person who is or becomes a party to a proceeding (including a defendant in a criminal proceeding); and

(b)    adverse to the person’s interest in the outcome of the proceeding.

85    The expression “previous representation” is defined as meaning “a representation made otherwise than in the course of giving evidence in the proceeding in which evidence of the representation is sought to be adduced”. The word “representation” is defined as including an express or implied representation (whether oral or in writing). Clause 6 of Pt 2 of the Dictionary deals with representations in documents. Clause 8 of Pt 2 deals with references to documents.

86    The ACCC contends that the parts of the documents it has identified fall within the definition of “admission” set out above. In response, Trivago contends that the parts of the documents identified by the ACCC are not adverse to Trivago’s interest in the outcome of the proceeding and are therefore not “admissions”. In the alternative, Trivago submits that, if any of the parts of the documents identified by the ACCC are admissions, then the whole of the document should be admitted on the same basis (that is, as evidence of the truth of the contents of the document) in order to provide context for the admissions.

87    I will deal first with the KWM September 2017 letter. In my view, the parts of this document identified by the ACCC are not adverse to Trivago’s interest in the outcome of the proceeding because: (a) they do not take matters beyond what is already covered by the evidence; or (b) they merely provide additional factual detail that does not assist the ACCC to make out its case (at least in relation to liability); or (c) they go to matters that are beyond the scope of the ACCC’s case as set out in the Concise Statement. An example of the second category is a statement at pp 4-5 of the letter about the average minimum CPC and the average maximum CPC on certain days in a particular city. These amounts merely provide additional detail about matters that are covered by the statement of agreed facts. They do not assist the ACCC to establish any of its claims. Accordingly, the KWM September 2017 letter will not be received as evidence of the truth of the contents of the document; it will, however, remain in evidence on the limited basis outlined above.

88    I turn now to Trivago’s Response to the ACCC. This document is headed “Attachment A – Response to Schedule 1 of ACCC Information Request dated 3 January 2018” and is dated 22 February 2018. In my view, subject to one exception, the parts of the document identified by the ACCC are not adverse to Trivago’s interest in the outcome of the proceeding because: (a) they do not take matters beyond what is already covered by the evidence; or (b) they merely provide additional factual detail that does not assist the ACCC to make out its case (at least in relation to liability); or (c) they go to matters that are beyond the scope of the ACCC’s case as set out in the Concise Statement. The exception concerns [5.1]-[5.12] of the document. The ACCC seeks to rely on parts of these paragraphs as admissions. I will set out these paragraphs in full, with the parts upon which the ACCC seeks to rely indicated in italics:

5.    In the period from 1 December 2016 to the date of this Notice:

(a)    state the total number of times that consumers visited the Australian Website and entered a region or location into Trivago’s search bar

5.1    trivago does not record the number of times users visit its Australian Website and enter a region or location into the search bar. However, trivago records the number of times new search results are displayed on its Australian Website. New search results may be displayed as a result of: (ia user entering a location, region or Hotel into the search bar; (ii) a user changing the search parameters (e.g. by using one of the available sort or filter functions on trivago’s Australian Website); or (iii) a search engine link redirecting to a search result page on trivago’s Website.

5.2    In the period 1 December 2016 to 3 January 2018 new search results were displayed on trivago’s Australian Website 217,514,783 times. (Please note this number is different from the “sessions” numbers discussed below.)

(b)    state the total number of consumers who, after entering a region or location into Trivago’s search bar, took the following actions:

5.3    As noted above, trivago does not record the number of users visiting its Australian Website or the number of times a user enters a location or region in trivago’s search bar. However, trivago records the number of user “sessions. A session starts when a user first interacts with the trivago Website and continues until the user has been inactive for one hour. For example, if a user visits trivago’s Australian Website and is then inactive for an hour before interacting with the site again, two user sessions will be logged by trivago’s system. Accordingly, the number of sessions is likely higher than the number of users, and less than the total number of times new search results were displayed on trivago’s Australian Website. However, as more precise data regarding unique user or search numbers is not available, trivago provides the number of sessions it has recorded as in its responses to question (i)-(xiii) below.

(i)    changed the sorting order from the Default Sorting Option to a different Sorting Option

5.4    In the period 1 December 2016 to 3 January 2018 there were 4,421,184 sessions on trivago’s Australian Website where the sorting order was changed from the Default Sorting Option to a different Sorting Option.

(ii)    clicked on the More Deals Button for any Hotel listing

5.5    trivago does not record the number of times the More Deals Button is clicked. However, trivago records the number of times the More Deal Slide-Out is visible for any Hotel listing on its Australian Website. The More Deals Slide-Out can be accessed by clicking the More Deals Button but also in other ways (for example, by clicking on the Hotel name and then on the ‘Deals’ tab).

5.6    In the period 1 December 2016 to 3 January 2018 there were 4,726,241 sessions on trivago’s Australian Website where the More Deals Slide-Out was displayed.

(iii)    clicked through on a deal located in a More Deals Slide-Out

5.7    In the period 1 December 2016 to 3 January 2018 there were 1,400,205 sessions on trivago’s Australian Website where a user clicked on a deal displayed in the More Deals Slide-Out.

(iv)    used any of the filtering tools on the left-hand side of the screen

5.8    In the period 1 December 2016 to 3 January 2018 there were 4,232,643 sessions on trivago’s Australian Website where any of the filtering tools on the left-hand side of the webpage were used. This figure does not include interactions with the two search bars on the left hand side of the webpage (for “Distance from [address]” and “Search hotel name”).

(v)    clicked on a Top Position Offer for any Hotel listing

5.9    In the period 1 December 2016 to 3 January 2018 there were 20,039,530 sessions on trivago’s Australian Website where the Top Position offer for any Hotel listing was clicked.

(vii)    clicked on a Comparison Rate used in a Strike-through Price Representation

5.10    The Comparison Rate used in the Strike-through Price Representation is not clickable but the Comparison Rate displayed immediately to the left of the Top Position offer (see screenshot below) can be clicked. The Comparison Rate offer is also available in the More Deals Slide-Out.

5.11    trivago does not record clicks on the Comparison Rate unless the user clicks on the Comparison Rate displayed immediately to the left of the Top Position Offer as shown in the screenshot below.

5.12    In the period 1 December 2016 to 3 January 2018 there were 68,783 sessions on trivago’s Australian Website where the Comparison Rate displayed immediately to the left of the Top Position offer was clicked.

(Italics added.)

89    In my view, the italicised parts of [5.3], [5.6], [5.7], [5.9] and [5.12] support the ACCC’s contentions regarding the appearance of the website and thus the ACCC’s contentions that the alleged representations were made. In particular, the comparison between the number of sessions where the Top Position Offer was clicked (20,039,530) and the number of sessions where the More Deals slide-out was displayed (4,726,241) provides support for the ACCC’s contentions regarding the prominence given to the Top Position Offer. The italicised parts of the above paragraphs are therefore adverse to Trivago’s interest in the outcome of the proceeding. In order to provide proper context, it is necessary to have regard to the other parts of the paragraphs set out above. Accordingly, I will receive [5.1]-[5.12] of Trivago’s Response to the ACCC as evidence of the truth of the contents of those paragraphs. The balance of the document will not be received as evidence of the truth of the contents; it will, however, remain in evidence on the limited basis outlined above.

90    I note for completeness that [5.13]-[5.20] of Trivago’s Response to the ACCC deal with a distinct subject-matter, relating to the order in which different hotels are listed on the Initial Search Results Page. The ACCC sought to rely on all but one of the paragraphs in that section. In my view, those paragraphs go beyond the scope of the ACCC’s case as set out in the Concise Statement.

FINDINGS IN RELATION TO THE COMPUTER SCIENCE EXPERT EVIDENCE

91    In this section of these reasons, I deal with the computer science expert evidence led from Mr Bajanov (called by the ACCC) and Professor Parkes (called by Trivago). Each of the experts was qualified to give the evidence that they did. Notwithstanding some cross-examination seeking to suggest that each expert was not independent or impartial, I consider that each expert expressed their opinions independently and impartially. Both experts impressed me as being very knowledgeable about the matters about which they gave evidence. To the extent that, in some respects, I prefer the evidence of one expert over the other on particular points, this should not be taken to be a reflection on the calibre of the expert; it is, rather, more a function of the issues that arise for determination in the context of this proceeding.

92    Mr Bajanov prepared an initial report dated 15 May 2019 (the First Bajanov Report) addressing nine questions that had been set out in his letter of instructions. Professor Parkes then prepared a report dated 15 July 2019 (the First Parkes Report), which largely responded to the First Bajanov Report. Mr Bajanov prepared a reply report dated 5 August 2019 (the Second Bajanov Report). Although not contemplated by the procedural orders, Professor Parkes then prepared a further report, dated 22 August 2019 (the Second Parkes Report), that provided additional analyses by way of response to the Second Bajanov Report. The two experts conferred to prepare a joint report dated 9 September 2019 (the Joint Report). The Joint Report is structured around the nine questions addressed in the First Bajanov Report, with elaboration in some cases to pick up additional questions dealt with in the subsequent reports. In the column “Points of Agreement”, there are certain matters (appearing in blue text) in respect of which Mr Bajanov had not verified the calculations.

93    As noted earlier, Mr Bajanov and Professor Parkes gave evidence concurrently. The session was structured around the nine questions set out in the Joint Report, with each expert giving a brief opening statement in relation to each question, followed by questions from counsel. After the completion of that process, there was some limited cross-examination (and re-examination) of each expert.

94    The concurrent evidence of the two experts was conducted in closed court due to the commercial sensitivity of some aspects of the Top Position algorithm and other data provided by Trivago, and the difficulty of discussing the issues without referring expressly to those matters. However, a claim for confidentiality is made only in respect of limited parts of the expert reports (including the Joint Report). The parts that are claimed to be confidential are highlighted in yellow; there are only limited parts of each report that are so highlighted. In preparing these reasons, I have endeavoured to avoid referring expressly to the parts of the expert reports in respect of which confidentiality has been claimed, and also to avoid referring expressly to the parts of the oral evidence of the two experts that disclosed the same material. However, I will refer to other parts of their oral evidence; that is, the parts of their oral evidence where they dealt with matters in the expert reports in respect of which confidentiality has not been claimed. I have included some evidentiary references to the concurrent evidence to assist the parties’ consideration of these reasons.

95    I note at this point that it emerged during the oral evidence that Professor Parkes’s reports were prepared with substantial assistance from a firm named Keystone Strategy (T172-176). It would have been desirable for the role of Keystone Strategy to have been described in the reports. Nevertheless, I am satisfied that Professor Parkes checked the drafting and calculations undertaken by Keystone Strategy and that the reports reflect Professor Parkes’s own opinions.

96    It will be convenient to structure this part of these reasons around the nine questions set out in the Joint Report. Where I refer in this section of the reasons to “the experts”, I am referring to both Mr Bajanov and Professor Parkes. (I discuss the other expert evidence separately, in later sections of these reasons.) In some of their evidence, the experts referred to online booking sites, online travel agencies and hotels as “advertisers”; however, for the reasons indicated above, I will refer to these entities as “Online Booking Sites”.

Question 1: Making reference to the source code, pseudocode and written descriptions in the documents provided, provide a brief, high-level description of how the Top Position and Default Sorting algorithms operate

97    Although this question refers to both the Top Position algorithm and the Default Sorting algorithm, it is only the first of these that is directly relevant to this case. The Default Sorting algorithm is concerned with the order in which listings appear on the Trivago website. However, the ACCC’s case, as outlined in its Concise Statement, does not complain about the order in which Trivago lists hotels on the website. The Default Sorting algorithm can therefore be put to one side for present purposes.

98    There was general agreement between the experts in relation to this question. I summarise the position that emerges from their evidence as follows.

99    The Top Position algorithm calculates a “composite score” for each offer made by an Online Booking Site with respect to a hotel listing. (The word “offer” here refers to the offer price for the hotel room, rather than the CPC bid.) The offer that has the highest composite score becomes the Top Position Offer for that hotel listing.

100    The inputs to the composite score (as set out in the Joint Report) are:

(a)    the offer price, the CPC and the priority modifier;

(b)    hotel position, average historical price, historical click-through rate; and

(c)    minimum price, maximum price, minimum priority CPC, maximum priority CPC, minimum gain and maximum gain.

101    It is necessary to explain a number of the expressions referred to in the preceding paragraph:

(a)    As already indicated, the “offer price” refers to the offer price for the hotel room, rather than the CPC bid.

(b)    The “CPC” is the CPC that the Online Booking Site agrees to pay Trivago in respect of the hotel listing (also referred to as the CPC bid).

(c)    The “priority modifier” is a value that adjusts the CPC value, as discussed further below. The “priority CPC” is the CPC multiplied by the priority modifier.

(d)    The expression “gain is a quantity related to the estimated revenue to Trivago from showing an offer, calculated as the product of the predicted Click Through Rate (CTR) on the offer and the priority CPC (the modified CPC bid for the offer) (see the glossary in the First Parkes Report).

102    Some of the other expressions referred to in [100] above are explained in the discussion of question 2, below.

103    The priority modifier was described by Professor Parkes as a “kind of quality adjustment” that is made to the CPC bid of an Online Booking Site (T161). While there was agreement between the experts that the priority modifier is strongly correlated with, or heavily dependent on, a value called the “landing page score” (T161, T165), the evidence regarding the landing page score was incomplete. Professor Parkes’s understanding of the landing page score was based on the information that Trivago provided to Online Booking Sites and Trivago’s Response to the ACCC (T161), but the statements in those documents were not proved in evidence by Trivago. (As noted earlier, Trivago did not call any of its officers or employees to give evidence.) Thus, while it may be accepted that Trivago stated in those documents that the landing page score is a measure of the quality of the Online Booking Site’s landing page in terms of user experience, I am not prepared to accept that the landing page score actually operated in that way. As Professor Parkes said in his evidence, neither he nor Mr Bajanov had been able to analyse how Trivago goes about calculating the landing page score (T165). Further, Professor Parkes made clear that his conclusions regarding the landing page score were “contingent” on the statements made by Trivago to the Online Booking Sites and to the ACCC (T165). In any event, I note that, even if the landing page score did operate in the manner understood by Professor Parkes, it measured the quality of an Online Booking Site’s landing page, rather than the quality of the hotel accommodation offers themselves.

Question 2: What factors influence whether an offer is selected as the Top Position Offer?

104    The experts agreed in the Joint Report that the following factors are the raw inputs into the Top Position algorithm:

(a)    The minimum listing price: the minimum price of all offers within a listing;

(b)    The maximum listing price: the maximum price of all offers within a listing;

(c)    The hotel position in the search results;

(d)    The historical click through rate for the hotel;

(e)    The average historical price of the hotel over a pre-defined period;

(f)    The offer price: the price provided by the Online Booking Site for a specific offer within a listing;

(g)    The CPC: the CPC bid made by an Online Booking Site for a specific offer;

(h)    The priority modifier: see the discussion in relation to question 1, above;

(i)    The minimum gain and maximum gain of all offers within the listing; and

(j)    The minimum priority CPC and maximum priority CPC for all offers within the listing.

105    Both experts considered this question to be fairly straightforward, and there was no disagreement between them. It should be noted that the experts use the term “listing” to refer to each grouping of offers for a particular hotel, for the location and date range specified by the consumer (T177). I note for completeness that the listing does not include offers that are filtered out because they do not meet the minimum CPC threshold.

Question 3: What is the weighting or relative importance of these factors?

106    This question is the main area of disagreement between the experts. In order to explain the disagreement, it is necessary to start with the First Bajanov Report. In that report, in response to question 3 (which was in the same terms as set out above), Mr Bajanov drew a distinction between the effect of the factors on the composite score, on the one hand, and the effect of the factors on an offer being selected as the Top Position Offer, on the other. Mr Bajanov explained in that report that “[a]lthough the [Top Position Offer] is always the offer with the highest composite score, it is not necessarily the case that the main driving factors should be the same for both the composite score, and the resulting [Top Position Offer] outcome”. Mr Bajanov explained his view as follows:

This is because only offers with a composite score near the top of their listing have any chance of becoming the [Top Position Offer]. However, when considering the composite score itself, it would still be possible for offers which are never realistically going to be chosen as the [Top Position Offer] to have large variations in composite score, and for those variations to be driven by factors that have a large impact on the composite score but are less relevant to [Top Position Offer] selection.

107    Mr Bajanov provided the following analogy to explain his approach:

Perhaps the best way to understand this concept is by analogy. Consider looking at the factors that drive running performance in a group of people, such as the 100-metre sprint. If we look at what factors determine the time in which someone can run 100 metres, we may conclude a different set of factors have an influence than if we look at someone’s probability of winning a 100-metre running race within that group. This is because most people are not fast enough to have any chance at winning – these people may have very different times, and there may be some factors that can very reliably explain those differences (such as, for example, an individual’s age), but these would not be as relevant when determining who is most likely to win – since beyond a certain point, it is not relevant how much lower an individual’s chance of winning is compared to another.

108    On this basis, Mr Bajanov utilised two methods to consider question 3:

(a)    First, he considered the effect of the various factors on the composite score by reverse engineering the Top Position algorithm (section 3.1 of his first report).

(b)    Secondly, he considered the effect of the various factors on an offer being selected as the Top Position Offer by building a ‘Gradient Boosting Model(explained below) (section 3.2 of his first report).

109    Mr Bajanov had been provided with Trivago data for three dates (9 December 2017, 3 January 2018 and 5 April 2018) in respect of four capital cities. The reason Mr Bajanov adopted a reverse engineering approach in his first method was because he had not, at that stage, been provided with certain ‘weights’ used in the Trivago algorithm. However, in terms of the disagreement between the experts, little, if anything, turns on the fact that Mr Bajanov used a reverse engineering approach. This is because the major area of disagreement between the experts concerns Mr Bajanov’s second method, rather than his first method. Applying his first method, Mr Bajanov concluded that the three factors with the most influence on the composite score on December 2017 were (in order of importance):

(a)    offer price;

(b)    CPC; and

(c)    minimum listing price.

For January 2018, the three factors with the most influence were (in order of importance): offer price; CPC; and hotel position.

110    The concept of a Gradient Boosted Model (or Gradient Boosted Machine) is explained in the glossary to the First Bajanov Report as being a machine learning algorithm commonly used by data science professionals to predict a single outcome given a set of raw input data; it is widely used due to its high accuracy and its ability to determine the relative contributions of the input factors to each predicted value. Applying this method, Mr Bajanov concluded that the CPC had the highest relative importance in determining which offer was most likely to be selected as the Top Position Offer, followed by the maximum priority CPC and the priority modifier. For example, he concluded that on 9 December 2017, the factors had the following relative importance:

(a)    CPC (59.0%);

(b)    maximum priority CPC (21.0%); and

(c)    priority modifier (9.6%).

111    Under this methodology, the CPC was the most important factor on all three dates, with a relative importance of between 52.9% and 59.2%. The range for priority modifier was from 8.7% to 18.3%. The range for offer price was from 0.7% to 1.0%.

112    Mr Bajanov stated in his first report that he believed the results set out in section 3.2 more accurately answered question 3 because the method applied in this section specifically identified the relative importance of the factors on the selection of the Top Position Offer.

113    Professor Parkes, in his first report, strongly disagreed with the appropriateness of the second method utilised by Mr Bajanov in answering question 3. In Professor Parkes’s view, the use of the Gradient Boosting Model methodology for the purposes of understanding effect size on Top Position Offer determination was “critically flawed”. Professor Parkes stated:

The GBM methodology cannot be used to evaluate the effect of making changes to inputs, and Mr. Bajanov’s deference to only GBM results presents a superficial and misleading set of findings and misses the bigger picture. Mr. Bajanov’s GBM model is able to predict the [Top Position Offers] selected under the market forces created by Trivago’s system, but is uninformative as to how the market’s equilibrium is reached or the factors that influence this equilibrium. The problem with his analysis is particularly noticeable when Mr. Bajanov fails to adequately explain his counterintuitive finding that offer price, while having the largest effect on composite score, plays little to no role in regard to determining the [Top Position Offer].

In fact, there is a simple and consistent explanation for his two seemingly conflicting findings. From Mr. Bajanov’s own analysis of the composite score, we know that Trivagos [Top Position] algorithm is strongly sensitive to offer price. In this way, Trivago’s platform is designed to encourage competition on offer price, with serious contenders for [Top Position Offer] converging to closely priced offers. As a result of this, CPC plays the role of a tiebreaker to select the [Top Position Offer], by which I mean it informs the choice of [Top Position Offer] among many similarly low-priced offers. It is this role as tiebreaker that is picked up as a predictive signal by the GBM model, and this explains the apparent contradiction in the two results of Mr. Bajanovs analysis.

(Footnote omitted.)

114    I note that, in answering question 3, Professor Parkes based his analysis on the Top Position algorithm itself, rather than reverse engineering that algorithm, in circumstances where he had access to the ‘weights’ used by Trivago. However, as already indicated, not much turns on this difference between the experts’ reports. I also note that Professor Parkes adopted an Accumulated Local Effect (or ALE) method, as distinct from a Partial Dependence Plot (or PDP) method, as had been used by Mr Bajanov in section 3.1 of his first report. However, the differences between those two methods are not material for present purposes.

115    Applying his methodology, Professor Parkes concluded that: the offer price was the most important factor in selecting the Top Position Offer on all three dates, with a relative importance between 45.5% and 60.0%; the CPC is the second most important factor on all three dates, with a relative importance between 33.8% and 44.8%; the priority modifier is the third most important factor on all three dates, with a relative importance between 4.0% and 13.3%; and the other factors have no bearing.

116    In the Joint Report, the experts expressed agreement on a number of points. In particular, they agreed that the effect of offer price on composite score is larger than all other factors for December 2017 and 3 January 2018, whether using Mr Bajanov’s reverse engineering weights or the Trivago-provided weights, and whether using the PDP or the ALE method.

117    In the Joint Report, the experts stated that the key issue between them was whether the “win/loss analysis” (referring to whether a particular offer succeeds in being selected as the Top Position Offer) “should be done using the observed data, which reflects the mix of bidding and pricing outcomes experienced by Trivago on the three dates in question (‘GBM methodology’), or using the same data together with knowledge of Trivago’s composite score algorithm to test the effect of varying the bidding and pricing inputs, and the effect of these changes on outcomes (‘Parkes methodology’)”. The experts then stated that the two methods were suited to answering different questions. In summary:

(a)    with regard to the GBM methodology, the question answered is: what is the relative importance that can be attributed to the variation in the input factors in explaining the listings outcomes observed on the three dates and four cities presented in the data; and

(b)    with regard to the Parkes methodology, the question answered is: what is the relative importance that can be attributed to the input factors in determining the Top Position Offer selection outcomes, considering the effect of changing inputs relative to those listings observed on the three dates and four cities presented in the data.

118    The experts agreed that the GBM methodology was valid for answering the first question set out above, and that the Parkes methodology was valid for answering the second question. Further, there was no issue between the experts as to the execution of either methodology.

119    In the course of oral evidence, there was extensive discussion of the merits of the alternative approaches. Professor Parkes provided an apartment analogy to illustrate the difference in the two approaches:

I am going to talk about the setting in my neighbourhood, where I live, in Cambridge. Apartment prices tend to be around the same price. If the apartments are not priced competitively, then they don’t get any visitors; nobody wants to rent them. So there’s a certain level that your apartment has to be priced at for your apartment to even be considered as an apartment suitable to rent. And then there’s some remaining variability. The apartments might vary by the walkability of the neighbourhood or the amount of natural light.

If we use Mr Bajanov’s analysis on that data, because there’s basically no variation in the apartment price, indeed it would look as though apartment price doesn’t matter. It would look [as] though natural light matters much more than the price. But it would be silly to conclude that the apartment price doesn’t matter. It’s precisely because it matters that the apartments have to be priced at the same level. So I think … that’s the best way I can think of to kind of describe how I think about our disagreement.

120    Professor Parkes, in particular, made reference to the CPC playing a ‘tie-breaking’ role. The premise of this description is that most of the offers for a listing were at or about the same price, so that the role of the CPC was merely to decide between such offers. While it is true that a large proportion of offers for a listing were at or about the same price, it is important to note that a significant portion were not (see the percentages set out in [125(b)] below). There may be a question about whether it is apt to label the CPC a ‘tie-breaker’ for situations where the Top Position Offer is not the cheapest offer and there is a substantial difference between the Top Position Offer and the cheapest offer.

121    Ultimately, it does not appear to be necessary to form a concluded view as to which of the experts’ approaches is preferable. Mr Bajanov’s analysis involved looking at the events that happened and assessing the relative importance of the various factors in the selection of a particular offer as the Top Position Offer. Professor Parkes’s analysis involved assessing the relative importance of the various factors by making adjustments to those factors and assessing the effect of making such adjustments on the selection of an offer as the Top Position Offer. Each method addresses a different question, and the answers to both questions may be of assistance in resolving the issues in the proceeding; in particular, the question whether, if the alleged representations were made, they were misleading or deceptive or liable to mislead. It is important to note that, even on Professor Parkes’s approach, the CPC is a very significant factor in determining the Top Position Offer: it is the second most important factor, with a relative importance of between 33.8% and 44.8%.

Question 4: How and to what extent (if any) does the Top Position offer algorithm filter certain offers made by advertisers?

122    It is common ground between the experts that the Top Position algorithm filters out offers which do not meet a minimum gain threshold. Offers are also filtered out by a minimum CPC, the amount of which is confidential. I note for completeness that the data for the three dates and four cities provided to the experts included both offers that were displayed on the Trivago website and those that were filtered out, and that the data did not specifically indicate whether or not an offer had been displayed on the website.

Question 5: How important is an advertiser’s CPC payment in determining the Top Position Offer?

123    There is disagreement between the experts in relation to this question, but it is fully covered under question 3 above. The experts also agreed on several matters in relation to this question, including (as set out in the Joint Report):

84.52% of listings have a [Top Position Offer] with offer price lower than mean and CPC higher than mean. The mean CPC within a listing is highest when the offer price varies the least within a listing. This reflects that high CPC and low-priced offers are not inconsistent.

The above statement is subject to the qualification that Mr Bajanov did not verify the calculations for the figure of 84.52%.

124    In oral evidence, Professor Parkes referred to Fig 21 of his first report, which provided further information about this subject-matter. As confirmed in oral evidence (T217-218), the effect of Fig 21 is that:

(a)    approximately 86.5% of listings have a Top Position Offer that is lower than the mean of all offers; and

(b)    conversely, approximately 13.5% of listings have a Top Position Offer that is higher than the mean of all offers.

Question 6: How frequently are higher priced hotel offers selected as the Top Position Offer over alternative, lower priced offers? In these cases (if any), what factor primarily determines why a higher priced offer is selected over a lower-priced offer?

125    The experts agreed on a series of propositions in relation to this question, including:

(a)    Higher priced hotel offers are selected as the Top Position Offer over alternative lower priced offers in 66.8% of listings.

(b)    In regard to the comparison with the lowest price offer, the price of the Top Position Offer is the same in 33.2% of listings, within 1% in 63.1%, within 5% in 79.3%, within 10% in 88.7%, within 15% in 95.3%, and within 20% in 97.3%.

(c)    When a higher priced offer is selected as the Top Position Offer over the lowest price offer then the observable variation between the two offers is explained by a difference in CPC more than any other factors. The next most common factor is the priority modifier, which is the leading factor in between 2% and 8% of the listings, depending on city and date.

126    In relation to (a) above, in oral evidence the experts confirmed that this figure was based on their analysis of all the data provided to them; in other words, it includes both offers that were displayed on the Trivago website and offers that were not displayed (i.e. those that were filtered out) (T229-230).

127    In relation to (b) above, the effect of these figures is that, in approximately 88% of cases, the variation between the Top Position Offer and the cheapest offer was less than 10%. Conversely, in approximately 12% of cases, the variation between the Top Position Offer and the cheapest offer was more than 10% (T220-221).

128    In relation to (c) above, Professor Parkes provided the following elaboration in oral evidence (T229):

When it is [the case] that the top position offer is not the cheapest offer, the variation between those offers that best explains that decision is the CPC. I agree with that. When they are priced differently, the variation that best explains it is coming through CPC. And it kind of has to be. You don’t need all of the fancy analysis that we’re talking through to understand that. The algorithm is scoring an offer. It’s calculating the score. It’s using a number of inputs, but the ones that are material at the moment are offer price and CPC. And if the offers are kind of generally close on offer price, then if the algorithm is making a decision for one over the other, generally, it will be because there’s a variation in CPC.

Question 7: What percentage of listings had a Top Position Offer with the highest CPC of all offers within that listing? Further, how does CPC generally relate to offer price?

129    In relation to this question, the experts agreed that 56% of the listings had a Top Position Offer with the highest CPC.

130    Further, subject to the qualification that Mr Bajanov had not verified the calculations, the experts agreed that, in 84.5% of listings, it is both the case that the Top Position Offer has an offer price lower than mean and that the CPC is higher than mean. This reflects the proposition that high CPC and low-priced offers are not inconsistent.

Question 8: What percentage of listings had a Top Position Offer with the cheapest price offer of all offers within that listing? What percentage of listings had a Top Position Offer within 1% or 5% of the cheapest offer of all offers within that listing?

131    In relation to this question, the experts agreed that:

(a)    33.2% of listings had a Top Position Offer that was the cheapest offer; and

(b)    when the Top Position Offer was 10% or 20% higher than the minimum listing price, there was a discontinuity in the distribution of the price of other offers at the same 10% or 20% price points. The experts said that they had not been provided with data to definitively establish the cause of the discontinuity.

I note that the statement in (b) above is subject to the qualification that Mr Bajanov did not verify the calculations.

132    Further, the experts referred to their responses to question 6 for additional details on the distribution of price differences between the Top Position Offer and the cheapest offer.

133    The experts included the following points of disagreement in the Joint Report:

    Professor Parkes considers the most likely explanation for price discontinuity to be [attributed to] heterogeneity between offers.

    Mr Bajanov believes that there are various possible explanations for the discontinuity – heterogeneity between offers within one listing is one, but another is, for example, [Online Booking Sites] trying to capture a first mover advantage by lowering a price below the minimum level where other offers are clustered.

Question 9: Considering only listings where the Top Position Offer was not the cheapest price offer of all offers within that listing, what percentage of the Top Position Offers had a CPC value higher than the cheapest offer? Further, what are the other factors by which the Top Position Offer and cheapest price offer differ?

134    In relation to the first part of this question, the experts agreed in the Joint Report that, considering offers where the Top Position Offer was not the cheapest offer of all offers within a listing, 95.9% of the Top Position Offers had a CPC value higher than that of the cheapest offer.

135    There was a difference of opinion between the experts in relation to the second part of question 9. (This part of the question was not included in the original questions asked of Mr Bajanov and was not dealt with in his first report.) In order to explain the difference of opinion, it is helpful to start with Professor Parkes’s reports. In the First Parkes Report, at section 6.9, Professor Parkes referred to economic principles and academic literature concerning consumer behaviour in relation to the attributes of a hotel room. He stated that the academic literature documented that consumers believe that offers for a given hotel room are heterogeneous. Professor Parkes stated that he had created a dataset of listings where the Top Position Offer differed by more than 1% from the lowest price offer and had examined the variations in attributes between the Top Position Offer and the lowest price offer for the listings in this dataset. He stated that his analysis did not attempt to quantify the value of those attributes.

136    Professor Parkes explained that, in order to create this dataset, he searched the Trivago website for a one-night stay in Adelaide, Melbourne, Perth and Sydney four days in advance of check-in. (This was seen as a typical search that a consumer would do on the Trivago website: T234.) The search was carried out on 11 July 2019. From these searches, Professor Parkes examined all first page listings for which the Top Position Offer was at least 1% more than the lowest price offer listed. This yielded 27 listings. For each of the corresponding pairs of Top Position Offer and lowest priced offer, Professor Parkes recorded whether each of the Top Position Offer and lowest price offer included the following attributes: free cancellation; bed size; free Wi-Fi; pay at hotel; and free breakfast. The results of this analysis were set out in the report (and are set out later in these reasons).

137    Following criticism of this analysis in the Second Bajanov Report, including on the basis of sample size, Professor Parkes supplemented his analysis by collecting additional datasets of listings on 9 August 2019 and 13 August 2019 (section 5.2 of the Second Parkes Report). Professor Parkes stated that this further analysis reaffirmed the conclusions in section 6.9 of his first report, namely that there is clear evidence of heterogeneity among offers for a hotel listing. Again, Professor Parkes examined all first page listings for which the Top Position Offer was at least 1% more than the lowest price offer listed. This yielded 28 listings for 9 August 2019 and 30 listings for 13 August 2019. For each of the corresponding pairs of Top Position Offer and lowest price offer, Professor Parkes carried out the same analysis as described above.

138    The results of this analysis were set out in Figures 6, 7 and 8 in the Second Parkes Report (including, as Fig 6, the results for 11 July 2019):

139    In the above figures, the statement “TPO [Top Position Offer] is equivalent to lowest price offer” means that the offering is equivalent in respect of the particular attribute – either they both have it or they both do not have it (T237). The statement “TPO is better than lowest price offer” means that the Top Position Offer is better than the lowest price offer in respect of the particular attribute – for example, the Top Position Offer has free Wi-Fi and the lowest price offer does not.

140    It should be noted that the above analyses were not based on the Trivago-provided dataset analysed by the experts and discussed above in relation to earlier questions. That dataset related to three earlier dates. Rather, the analyses set out in Figures 6, 7 and 8 were based on more recent searches carried out by Professor Parkes.

141    In oral evidence, Professor Parkes stated that: the results of these analyses were statistically significant; 87% of the time the Top Position Offer and the lowest price offer differed in non-price ways; moreover, where there was a statistically significant effect, it went in favour of the Top Position Offer (T234). Professor Parkes provided the following further observations, referring to his discussion with Mr Bajanov (T235):

And so where we have a discussion, I’m not even sure if it rises to a disagreement. It’s a discussion. Is how could this come about [?] So for me the way I think about it is now, if you will, there’s a bit of a mystery. I see that statistically significant effect in favour of non-price attributes – how can that be? We’ve had a discussion here today.

And I think there’s no disagreement about – that Trivago does not use non-price attributes to decide how to make a decision in regard to the top position offer. And as you think about it, there’s only one conclusion that makes any sense. The only conclusion that makes any sense – as Trivago has also stated – but it’s, indeed, the only conclusion that is consistent as an explanation with the data that I have observed – is that the cost per click – the bid is conveying, implicitly, information that is carrying this idea that the offer might be favourable in other ways. And that is how I believe these non-price attributes are coming into the algorithm. And I think that’s quite clever.

This is an example of an incentive aligned way to get at information that would not be available to consumers otherwise. The CPC is conveying information in this case about the click to book rate on the site. And it’s information that would not otherwise be visible. And, in this case, through the design of the marketplace, the bids are in an incentive aligned way, it’s aligned with the incentives of the [Online Booking Site]. The bids are conveying this information.

142    As is clear from the above passage, and was common ground between the experts, the Top Position algorithm does not use non-price attributes to determine the composite score (and thus the Top Position Offer). Professor Parkes’s inference was that the CPC is conveying information about the quality of the underlying offer, and that this is a desirable by-product of the CPC bid mechanism (T244).

143    While Mr Bajanov accepted that the results of Professor Parkes’s analyses were statistically significant (T241), he did not accept that such an inference should be drawn. Mr Bajanov stated in the Joint Report that the experts had no “visibility” as to the way in which Online Booking Sites estimate or predict their prospective conversion rates in deciding on a CPC bid. Therefore, in Mr Bajanov’s view, the experts could not make any definitive statements about the role or importance of these particular non-price attributes.

144    For the reason given by Mr Bajanov, I am not satisfied that it should be inferred that the CPC is conveying information about the quality of the underlying offer. As Mr Bajanov said, the experts had no “visibility” as to the way in which Online Booking Sites estimate or predict their prospective conversion rates in deciding on a CPC bid.

145    Further and in any event, when comparing corresponding pairs of Top Position Offer and lowest price offer, Professor Parkes did not seek to value the non-price attributes. His analyses do not, therefore, provide a basis to compare the relative values of the Top Position Offer and the lowest price offer. It should also be noted that Professor Parkes’s analyses did not include offers that were excluded from the listings because they did not meet the minimum CPC threshold. Professor Parkes’s analyses do not, therefore, compare the Top Position Offer with all other offers; they merely compare the Top Position Offer with the cheapest offer that was displayed. For these reasons, in my view the matters outlined in [141] above do not indicate that in cases where the Top Position Offer was not the cheapest offer it nonetheless had some other characteristic which made it more attractive than any other offer for that hotel.

FINDINGS IN RELATION TO CONSUMER BEHAVIOUR EVIDENCE

Evidentiary ruling

146    As noted earlier, the ACCC sought to rely on a report of Professor Slonim and Trivago objected to the whole of that report. I ruled that the following parts of Professor Slonim’s report not be admitted into evidence, but that they be received as submissions pursuant to Item 19 of r 5.04(3) of the Federal Court Rules 2011:

(a)    Paragraph 2.1 on CB287.

(b)    The seventh and eighth bullet points in paragraph 6.2.5 (i.e. the text from “Another salient feature” to “evaluation and room choice”).

(c)    Paragraph 6.2.7.

(d)    Paragraph 6.4.1.

(e)    Paragraph 6.6.1.

(f)    Paragraphs 6.7.1 to 6.7.9.

(g)    Paragraphs 6.8.1 to 6.8.3.

(h)    Paragraphs 6.10.1 to 6.10.8.

(i)    Paragraph 6.11.6.

The balance of the report was admitted into evidence.

147    I now provide my reasons for that ruling.

148    Trivago objected to the report on two bases. The first basis was that the report only provided personal impressionistic views about the Trivago website and material of this character was simply not receivable. Trivago relied on Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215 (Domain Names) at [18]-[22]. The second basis was that the report did not meet the requirements for expert evidence in s 79 of the Evidence Act. Trivago relied on Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 (Dasreef) at [35]-[37], [42], [91]-[94], [128]-[130] and [133] and Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 (Makita) at [85]-[86]. Trivago submitted that the report did not disclose the process of reasoning that led to the opinions expressed, and that the opinions were not linked to any field of expertise or study.

149    In response, the ACCC submitted that the context of Domain Names was very different because in that case (as indicated at [7]) the primary judge had reached conclusions without regard to expert evidence; the contention that was advanced on appeal was that it was not open to the primary judge to reach the relevant conclusions without regard to certain types of evidence. The ACCC relied on Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 (Cadbury Schweppes) at [45]-[47], [51], [54]-[55] and [57].

150    Section 79(1) of the Evidence Act provides that, if a person has specialised knowledge based on the person’s training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is “wholly or substantially based on that knowledge”. In Dasreef, French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ stated at [37] that:

it is ordinarily the case, as Heydon JA said in Makita, that “the expert’s evidence must explain how the field of ‘specialised knowledge’ in which the witness is expert by reason of ‘training, study or experience’, and on which the opinion is ‘wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded.

(Footnote omitted.)

The majority then stated that, while the way in which s 79(1) is drafted necessarily makes the description of these requirements very long, “that is not to say that the requirements cannot be met in many, perhaps most, cases very quickly and easily”.

151    Applying s 79 and the principles expressed in Dasreef to the present case, in my view the parts of Professor Slonim’s report that I ruled to be inadmissible do not satisfy the requirements of that provision, as they do not explain how Professor Slonim’s field of “specialised knowledge” applies to the facts so as to produce the opinion propounded.

152    However, in respect of the balance of the report, I consider the requirements of s 79 to be met. First, as required by s 79, Professor Slonim has “specialised knowledge” based on his “training, study or experience”. Professor Slonim’s specialised knowledge lies in the fields of economics and behavioural economics. He is a Professor of Economics and has researched and published widely in the fields of economics and behavioural economics. Secondly, as required by s 79, the parts of the report that I ruled to be admissible are, in my view, “substantially based” on Professor Slonim’s specialised knowledge. Consistently with Dasreef, these parts of the report explain how Professor Slonim’s specialised knowledge applies to the facts so as to produce the opinion propounded. In particular:

(a)    Pages 12 to 19 of the report provide a summary of key discipline-specific concepts, including the concepts of “present bias”, “loss aversion” and “satisficers”. This portion of the report contains references to supporting sources, most of which are academic journal articles.

(b)    The concepts introduced in pages 12 to 19 are explicitly referred to and applied in the parts of the report that I ruled to be admissible. Thus, the report explains how Professor Slonim’s specialised knowledge applies to the facts and supports his conclusions.

(c)    Some portions of the report that I ruled to be admissible introduce and apply additional discipline-specific concepts that are not referred to in the introductory section. For example, in [6.3.2] Professor Slonim introduces the concepts of “merchant supplied reference price” and “decoy effect”.

153    Further, I would not characterise the parts of the report that I ruled to be admissible to be merely personal impressionistic views about the Trivago website. Rather, the report sets out Professor Slonim’s expert opinions about the purchasing decisions of consumers in the context of evaluating, comparing, choosing and purchasing hotel accommodation online. Evidence of this nature is potentially of assistance in a case such as this in determining whether or not the alleged representations were conveyed by the website and whether or not consumers were likely to be misled. It cannot be assumed that, even if the Judge has used such websites on occasion, he or she is necessarily familiar with the way in which consumers generally, or a substantial portion of consumers, interact with such a website.

154    I do not consider the above reasons to be inconsistent with Domain Names. In Domain Names, the Full Court at [21] quoted with apparent approval a passage from the judgment of Branson J in Cat Media Pty Ltd v Opti-Healthcare Pty Ltd [2003] ASAL 55-103; [2003] FCA 133 (Cat Media) at [55]. In that passage, Branson J stated that evidence of opinions based on market research and expert appreciation of consumer behaviour will “rarely be of assistance” in cases where the Court’s primary concern is with the behaviour and judgments of ordinary members of the community making a relatively modest purchase in a conventional way. This statement did not, however, preclude the receipt of such evidence; further, Branson J’s statement related to a particular class of case, which arguably does not include the circumstances here. Further, the contexts of Cat Media and Domain Names were quite different from the online hotel search context of the present case.

155    Further, the receipt of such material into evidence is consistent with the judgment of the Full Court in Cadbury Schweppes. In particular, at [57], the Full Court stated that the “fact that an opinion is expressed concerning the making of consumer decisions for the purchase of everyday items of commerce does not disqualify the opinion from being admissible, so long as s 79 is satisfied”.

Professor Slonim’s evidence

156    There was only limited cross-examination of Professor Slonim. Insofar as Professor Slonim’s report was admitted into evidence, very little of his evidence was challenged. I accept the evidence set out in Professor Slonim’s report (to the extent that it was admitted into evidence), subject to the qualifications he made during cross-examination.

157    In the following paragraphs I summarise some of the key points made by Professor Slonim in his evidence. It should be noted that Professor Slonim’s report and opinions relate only to recreational (as opposed to business) travellers. Further, one of the assumptions Professor Slonim made was that consumers using the Trivago website paid for hotel accommodation at the time of making an online booking. This was not invariably the case. In some cases, the Top Position Offer was displayed on the Trivago website together with the words “Pay at the hotel”, indicating that the consumer could pay later. Professor Slonim’s report needs to be read subject to this qualification.

158    In his report, Professor Slonim expressed the following opinions, which I accept:

(a)    A traditional economics approach, as presented in most basic texts and university courses, assumes that consumers are maximizers who gather all available information on all available options and all attributes of every option (e.g., for a hotel room this could include price, amenities, location, services, room size, cancellation policies, applicable taxes, and so forth) to come to a rational (i.e., optimal) decision that maximizes preferences over all attributes. Although this assumption on rational decision-making might explain some macro level market behaviour, there is extensive research with robust evidence over the past 40 years showing that this rational decision-making approach is not descriptive of how most consumers in most contexts make decisions. In general, consumers are often time constrained, do not have all (or even most) information easily accessible and cannot easily process more than a small amount of information in making choices. These constraints result in consumers using short cuts (known as heuristics) to make choices, and these heuristics in making choices are subject to many biases, resulting in deviations from making optimal choices. These biases can be influenced by many seemingly irrelevant factors including, but not limited to, (a) how information is presented, (b) the order in which information is presented, and (c) how choices are framed. The two most important and well-recognised biases that are relevant for present purposes are ‘present bias and ‘loss aversion’.

(b)    Present bias is a bias in decision-making in which consumers place an inordinate amount of weight on factors that affect them in the present (whether it is a benefit or a cost). Traditional economic analyses have been well-aware for at least a century that consumers might rationally place somewhat more weight in the evaluation of choices on factors that occur sooner than later, but present bias indicates that the weight that people place on the present is quite dramatically more important in decisions than the traditional economic approach has considered. One important consequence of present bias for decision making in general, and for booking a hotel in particular, is that since the costs of the time spent to find a room are borne at the time of making the decision (i.e., the present), whereas the benefits of finding the room occur in the future when the consumer gets to enjoy the room, consumers will look for ways to expedite the search process in order to take shortcuts in the decision process to save time in the present.

(c)    Loss aversion is a bias in which consumers are assumed to make choices by comparing options to each other with one item serving as the reference (or status quo or default) option and all other choices serving as the alternative options. The loss aversion bias in decision-making is that in making comparisons to a reference option, an equally sized gain and an equally sized loss are treated quite differently in terms of evaluating each alternative option. For instance, consider the following two cases. Case 1: the reference hotel has a price of $180 and an alternative hotel has a price of $200, the alternative hotel option thus has a loss of $20 on price compared to the reference hotel. Case 2: the reference hotel has a price of $220 and an alternative hotel again has a price of $200, the alternative hotel in this case has a gain of $20 on price compared to the reference hotel. In both cases, there is a change in price of $20 between the alternative and the reference hotel. In Case 2, the relative gain of $20 to the consumer will factor positively on the consumer choice for the alternative hotel, but in Case 1 the $20 loss will weigh much more heavily into adversely affecting the choice for the alternative hotel than the gain will help in Case 2. As a consequence of loss aversion, an option that becomes the reference item will be much more likely to be chosen when there are various trade-offs across attributes, since every alternative will have some attributes that will involve a loss compared to the reference item, and these losses will weigh more heavily than any gains on other attributes in the evaluation of each alternative option.

(d)    Another critical aspect in the process of choosing accommodation is the flexibility consumers have when considering the attributes of the accommodation. The attributes of a hotel purchase range from those that are very inflexible to those that consumers have some ability to compromise on. Inflexible attributes typically include the number of travellers, the general destination (e.g., a city or possibly a neighbourhood within a city) and the date(s) of travel. These inflexible attributes are often decided well before the booking process begins and are ones the traveller is likely unwilling to adjust regardless of the deal offered. The central importance of these attributes is clear given that most online hotel booking websites (e.g., Booking.com, Hotels.com, Expedia.com) ask for these details on their landing page.

(e)    Besides inflexible attributes, there may be several additional attributes of some importance to consumers; consumers might be able to make trade-offs over these additional attributes to some degree assuming they can still satisfy the inflexible attributes. For instance, the attributes that consumers might make trade-offs over include price, room and bed configuration, ratings, hotel amenities, and location within their target destination.

(f)    Another critical factor affecting online hotel search for most consumers is that people have a limited ability and motivation to process many choices (Iyengar and Lepper 2000), more generally referred to as information overload. One approach to dealing with having many options that rational decision-makers might follow if an initial search produces too many choices will be to use filtering tools (available on most booking sites) to narrow in the consideration set. Most websites offer a variety of ways to fine tune the choice set depending on which of these more flexible features are of most importance to the consumer. For instance, consumers can almost always sort on price. Given some evidence suggests that location, price and quality are the three most important attributes to consumers searching for a hotel (Sullivan 2019), to the extent that consumers use filters to refine and narrow their search, it is most likely that consumers will limit their search based on one or more of the three top attributes.

(g)    Most people (including those referred to in Professor Slonim’s report as satisficers) who face too many options, rather than proceeding to a more intense search, instead succumb to decision paralysis and accept the first choice that meets their inflexible attribute needs (location, dates, number of people) and is acceptable (i.e., satisfies) their other preferences. For instance, if the price is within some range of acceptability (e.g., under $200 or under $300) and the room has two beds, then they will be satisfied with the choice and proceed to book the room. There are several behavioural reasons this is likely to occur. First, once a consumer finds an initial accommodation that is satisfactory, any rooms that might be found with a further search are unlikely to be evaluated as better due to loss aversion given that there is a high likelihood that even if some attributes are better with the alternative room, other attributes are likely worse, and thus a loss on these attributes will receive greater weight in the evaluation. Secondly, consumers in many cases may not believe that they will be able to find a better deal, either because they do not think that they have the skill, or that it will take too much time to find a potentially better deal (present bias), or that there is not a better deal to be found if they search further. Moreover, in many decision-making situations, consumers often stay with defaults such as the first option they become aware of that is satisfactory (known as a status quo bias) because they lack confidence that another option might actually be a better deal.

159    In connection with the Strike-Through Price, Professor Slonim expressed the following opinions, which I accept:

(a)    The use of a comparison price that the consumer is not meant to choose is called a merchant supplied reference price. This price is used to frame the Top Position Offer price as less expensive by comparison. More generally, presenting an alternative higher price by a merchant to the option the merchant hopes the customer will purchase falls within a broad category of consumer behaviour, psychology and marketing known as the decoy (or attraction) effect (Huber, Payne and Puto 1982) when there may be many options to choose from. The decoy effect influences consumers by making the merchant’s desired item to sell, here the Top Position Offer, look better in comparison to the decoy option. By positioning the higher priced option in red next to the Top Position Offer, the strike-through reinforces the advantage of the best offer as being a lower price. Another potential effect of the strike-through is that it can help the consumer feel good about clicking through on the Top Position Offer by giving them the belief that they have found a good deal.

(b)    Finally, given the red strike-through price appears to be much higher than the Top Position Offer (often substantially more than $100 higher), the fact that the comparison price is substantially higher will be very likely to lead consumers to think the Top Position Offer will be an especially good offer. And once consumers believe the Top Position Offer is an especially good deal compared to the much higher comparison price, they will not believe there is any reason to search further (i.e., they will be satisfied) and will thus proceed to click through to obtain the incorrectly perceived ‘good deal.’ It is also worth noting that since many firms provide merchant supplied reference prices that are usually for the identical item (e.g., furniture), consumers will be used to believing that this much higher comparison price option will be for the same room.

FINDINGS IN RELATION TO ECONOMIC EVIDENCE

Evidentiary ruling

160    As noted earlier, Trivago sought to rely on a report of Mr Smith and the ACCC objected to the whole of that report. I ruled that the following parts of Mr Smith’s report not be admitted into evidence:

(a)    Paragraphs 18-21.

(b)    Paragraphs 45-46.

(c)    Paragraphs 50-53 (including Table 2).

(d)    Paragraph 55 (last sentence) and Figure 6.

(e)    Paragraphs 62-64.

(f)    Section VII.

The balance of the report was admitted into evidence.

161    I now provide my reasons for that ruling.

162    The ACCC objected to Mr Smith’s report: on the basis of relevance; on the basis that it did not satisfy the requirements of s 79 of the Evidence Act as discussed in Dasreef, including that Mr Smith lacked relevant expertise; and on the basis of hearsay.

163    It is convenient to deal together with [18]-[19] and [62]-[64] of Mr Smith’s report. In these paragraphs Mr Smith considered “the implications of the CPC for competition amongst advertisers”. (I note that Mr Smith used the term “advertisers” to refer to online booking sites, online travel agencies and participating hotels. Although I have used the expression “Online Booking Sites” elsewhere in these reasons, I will generally use the expression “advertisers” in discussing Mr Smith’s report.) The issues in the proceeding do not involve, and are not concerned with, whether the CPC promotes competition between advertisers. Accordingly, I consider these paragraphs to be irrelevant and therefore inadmissible.

164    It is convenient to deal together with [20]-[21] and Section VII of the report. In these parts of the report, Mr Smith considered “the implications of the CPC for competition amongst metasearch platform providers”, such as Trivago, TripAdvisor and Google. The issues in the proceeding do not involve, and are not concerned with, competition among metasearch platform providers. Accordingly, I consider these parts of the report to be irrelevant and therefore inadmissible.

165    Paragraphs [45]-[46] of Mr Smith’s report reproduce data produced by Choice, a leading consumer advocacy group, involving a ranking of a number of hotel booking websites according to their ease of use and performance. The data is hearsay and therefore inadmissible.

166    Paragraphs [50]-[53] (including Table 2) of Mr Smith’s report reproduce data produced by Roy Morgan, an Australian market research company, on the booking sources used by Australians for their last holiday trip, and by SiteMinder, which claims to be the global hotel industry’s leading guest acquisition platform, on the top hotel booking distribution channels (in relation to Australian hotel customers). The data is hearsay and therefore inadmissible. The same applies to the last sentence of [55] and Figure 6, which reproduce data from Roy Morgan.

167    The balance of Mr Smith’s report is largely concerned with the question of whether or not the CPC might form a proxy for some characteristics, in particular elements of quality, of the hotel accommodation. This is potentially relevant to the issue of whether, if the Top Position Representation was made, it was misleading or deceptive. As for the requirements of s 79 of the Evidence Act, I consider these to be satisfied. A copy of Mr Smith’s curriculum vitae is annexed to his report. Mr Smith holds an MA in Economics and Management and a M.Sc. in Economics for Development from Oxford University. Mr Smith has published widely in the area of economics. In light of these matters and the other matters covered in his curriculum vitae, I consider Mr Smith to have relevant specialised knowledge. Further, in relation to the part of the report that I ruled to be admissible, the reasoning discloses that the opinions are wholly or substantially based on that knowledge.

Mr Smith’s evidence

168    The questions that Mr Smith was instructed to address in his report were as follows:

(a)    Are there any economic grounds to conclude that the CPC represents or is a proxy for characteristics that are attractive to or beneficial for consumers?

(b)    If the answer to the above question is yes, what are those grounds and how (if at all) do they explain the relationship between advertisers’ CPC and the characteristics that are attractive or beneficial to consumers using the Trivago website?

169    In Section II of his report, Mr Smith provided an executive summary of his opinions. Section III of Mr Smith’s report, headed “Background”, set out Mr Smith’s understanding of various aspects of the Trivago website, including the Top Position algorithm and the landing page score. This section was based on documents or instructions provided to Mr Smith; Mr Smith made clear during cross-examination that he did not have personal knowledge of these matters.

170    In Section IV of the report, Mr Smith dealt with the topic of online advertising. He explained at [26] that the Trivago website is an example of a platform that operates in a ‘two-sided’ market, in which two distinct types of users obtain value from interacting with the opposite group, on a single platform. Mr Smith stated at [28] that both types of user benefit from the indirect network effects created by the platform that links them. In this case, the two types of users are consumers searching for a hotel room, and advertisers looking to fill hotel rooms. Mr Smith was not challenged on this description of the Trivago website and I accept it.

171    At [29] of his report, Mr Smith stated that Trivago “provides advertising that is free to consumers (consumers do not pay to access the trivago website), but charges advertisers (through the CPC)”. A theme that runs throughout Mr Smith’s report is that the advertisers are “advertising” on the Trivago website. In the course of his oral evidence, the question whether the Online Booking Sites are placing “advertisements” on the Trivago website was raised with Mr Smith:

HIS HONOUR: Could I just ask a question about that? Mr Smith, in that answer, and also in your report, you treat what booking.com or Expedia or Wotif or the other booking sites have done as placing an advertisement on Trivago’s website? What’s the basis for characterising what’s going on there as placing an advertisement?—I suppose technically they are transmitting images, prices, characteristics of a room offer to Trivago to place there, and they’re doing that in exchange for the CPC, if it’s clicked on. And I think consumers seeing that – going to Trivago effectively see a suite of offers much like they would in a classified director[y] or an old-fashioned yellow pages. That’s the economic sense in which I see it as a – as an advertisement.

But would a consumer see it as an advertisement? I mean, one way of looking at it is that the consumer might see it as Trivago aggregating the offers that are made on a series of other booking sites and Trivago as providing that helpful service?—Yes.

And that’s all it is, rather than an advertisement?—So I suppose it performs the same economic function. So it’s an offer made by a third party in assisting the consumer to ultimately choose and make a hotel booking. So I suppose it’s equally difficult, thinking in a supermarket analogy, if you go down the aisle, are those just offers, or are they advertisements? You know, if there’s a shiny bag, that’s part of a marketing message as well as part of a simple offer. If we went into supermarkets and only ever saw brown bags for every good and prices, those would be pure offers, and you would say everything – everything north of a brown bag in terms of look and feel and presentation is something of a marketing message. So that’s the sense in which I think these form the same economic function as an advertisement. They’re an attractive offer of – that someone has put forward that has characteristics and price attached to it.

172    Notwithstanding Mr Smith’s evidence in the above passage, I have some difficulty with the description of the Online Booking Sites as placing “advertisements” on the Trivago website, at least insofar as this description pertains to the perspective of consumers using the website. This description does not reflect the way in which the Trivago website was presented to consumers in Trivago’s television advertisements discussed at [47]-[50] above. In my view, these television advertisements convey that Trivago is providing a service for consumers by aggregating prices for hotel accommodation from across the internet, thereby enabling consumers to compare those prices. The television advertisements do not suggest that the Online Booking Sites pay Trivago to have their prices appear on the website. Further, the way in which offers are displayed on the Trivago website does not provide any indication that the Online Booking Sites are placing “advertisements. I therefore doubt that many consumers would interpret the offers that appear on the Trivago website as advertisements.

173    In [34] of his report, Mr Smith stated: “Advertising may provide consumers with additional information on available offers and prices. He also stated: “Separately, advertising costs may act as a signal of the quality of the good being provided.” (The same points were expressed in the executive summary of the report, at [15].) Mr Smith was cross-examined extensively on these propositions. Mr Smith explained that there are two relevant mechanisms (T328). The first mechanism is just providing information. As Mr Smith put it: “It tells you, ‘Here I am. This is my brand, this is my offer, and this is my price.’” The second mechanism puts the goods in the consumer’s mind. As Mr Smith put it, this mechanism “gives you some recognition and some likelihood that you will (a) go and purchase that, and (b) there might be repeat purchases”. Mr Smith referred to this distinction at other points during his oral evidence (T330, T342). It may be accepted that the display of an Online Booking Site’s offer on the Trivago website performs an information function. However, it is difficult to see how the “advertising costs” associated with an offer (i.e., the CPC) may act as a signal to consumers of the quality of the offer in circumstances where consumers using the Trivago website do not know the amount of the CPC. That conclusion is reinforced by the fact that, as Mr Smith accepted, the consumer might not even know there is a CPC (T342).

174    In Section V of his report, Mr Smith considered whether the CPC “might form a proxy for some characteristics, in particular elements of quality, which are hard to measure objectively, but are still likely to be valuable to consumers” (see [16], in the executive summary). Mr Smith summarised his conclusions at [17]:

I consider that there is substantial differentiation across the offers of different advertisers, even for the same hotel, in regard to the specific features of the room being offered, and various quality elements of the advertisers’ websites. Customers are likely to be aware of, and respond to, these quality differentials. trivago attempts to control for some aspects of the quality of advertisers’ websites, through a landing page score (“LPS”). CPC is likely to provide incremental information over and above LPS, and CPC is likely to be related to, and act as a proxy or signal for, several of the factors that are related to the quality and attractiveness of the advertisers’ websites and offers. The inclusion of CPC, as an additional signal of quality, is likely to allow trivago’s algorithm to improve the ranking of higher quality offers, and reduce the ranking of lower quality offers. This would be directly beneficial to consumers.

175    The statement that there is “substantial differentiation across the offers of different advertisers, even for the same hotel” was not challenged and may be accepted. Insofar as the above passage contains statements about the landing page score, Mr Smith accepted that he had no personal knowledge of how the landing page score operated (T332, 334).

176    The proposition that the CPC is likely to act as a proxy for several of the factors that are related to “the quality and attractiveness of the advertisers’ websites and offers” is developed at [58]-[61] of Mr Smith’s report. At [59] Mr Smith stated that, as a matter of economics, “the CPC that is bid for a given advertisement, should be guided by the likely returns from achieving a click on that advertisement”. Mr Smith stated that this might be driven by three factors:

(a)    the likely conversion rate – that is, the likelihood that a click through to the advertiser’s website will result in an actual booking;

(b)    the margin that is applicable on conversion to a booking; and

(c)    the prospect of an advertiser benefiting from encouraging a consumer to make a repeat visit directly to its website.

177    I am not persuaded that these three matters, separately or in combination, support the proposition that the CPC is likely to act as a proxy for the quality and attractiveness of an Online Booking Site’s website and offer. It may be accepted, as a matter of simple economics, that the amount that an Online Booking Site is prepared to bid (pay) as the CPC is likely to reflect its expected gain. However, there is no reason to presume that an Online Booking Site that expects a higher gain necessarily, or even ordinarily, has a higher quality offer. Mr Smith did not undertake any analysis, using actual data, to see whether or not a higher CPC was associated with a higher quality website and/or offer. Nor did Mr Smith examine the Top Position algorithm. I also note that Mr Smith did not differentiate between the quality of the Online Booking Site’s website and its offer. In light of these matters, I give this aspect of Mr Smith’s report very little weight.

APPLICABLE PRINCIPLES

178    Section 18(1) of the Australian Consumer Law states that a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. The question of whether conduct is misleading or deceptive within the meaning of s 18 is an objective one: Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198-199 per Gibbs CJ; Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45 (Campomar) at [107] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ.

179    The words “likely to mislead or deceive” in s 18 make it clear that it is not necessary to demonstrate actual deception to establish a contravention: Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 (Google) at [6].

180    Section 29(1)(i) of the Australian Consumer Law relevantly prohibits the making of false or misleading representations, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services, with respect to the price of goods or services.

181    Section 34 states that a person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.

182    The principles governing ss 18, 29 and 34 of the Australian Consumer Law are well established, and were recently set out by Gleeson J in Optus Mobile Pty Ltd v Telstra Corporation Ltd [2018] FCA 745 at [13]-[20].

183    While the words and phrases “misleading or deceptive”, “mislead or deceive”, “false or misleading” and “mislead” are synonymous, there is authority for the proposition that a distinction is to be drawn between “likely to mislead or deceive” (in s 18) and “liable to mislead” (in s 34). It has been said that the latter ought to be construed as applicable to a narrower range of conduct, and as requiring an “actual probability” of the public being misled: Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73 (Coles) at [44] per Allsop CJ; Australian Competition and Consumer Commission v Meriton Property Services Pty Ltd (2017) 350 ALR 494 at [191].

184    In relation to the representations part of this case, two steps are required in the analysis (Reckitt Benckiser (Australia) Pty Limited v Procter & Gamble Australia Pty Ltd [2015] FCA 753 at [35] per Gleeson J):

(a)    first, the Court must determine whether the facts establish that each or any of the alleged representations were conveyed by the conduct; and

(b)    secondly, the Court must determine whether each of the representations that was in fact conveyed was misleading or deceptive or likely to mislead or deceive.

185    In relation to the first step, in Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263, in the context of ss 18 and 29(1)(i) and (m) of the Australian Consumer Law, Foster J noted at [39] that where a headline representation is sought to be qualified by other material, the qualifying material must be sufficiently prominent to prevent the headline representation being misleading. The degree of prominence required will vary with the potential of the primary statement to be misleading (citing Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 at [37]-[41] per Stone J, Moore and Mansfield JJ agreeing). In this regard, it is the overall impression created by the representation that must be assessed.

186    The second step involves an objective determination by the Court of the effect of the representations on the ordinary or reasonable members of the class of consumers to whom the conduct is directed: Campomar at [102]; Google at [7] per French CJ, Crennan and Kiefel JJ. Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 (TPG) at [39] per French CJ, Crennan, Bell and Keane JJ. As Allsop CJ held in Coles at [39], “[t]he causing of confusion or questioning is insufficient; it is necessary to establish that the ordinary or reasonable consumer is likely to be led into error.” As this passage indicates, and as the High Court held in Campomar at [105], the focus of the inquiry is on the meaning that would be conveyed to a hypothetical ordinary or reasonable member of the relevant class of consumers. In that context, it is relevant to consider: whether any of the alleged reactions are extreme or fanciful such that they should not be attributed to the ordinary or reasonable members of the class of consumers (Campomar at [105]; REA Group Limited v Fairfax Media Limited [2017] FCA 91 at [18] per Murphy J); and whether a not insignificant number of consumers are likely to have been led into error (Australian Competition and Consumer Commission v Get Qualified Australia Pty Ltd (in liq) (No 2) [2017] FCA 709 at [42] per Beach J; Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147 at [2279] per Beach J).

187    Whether conduct in relation to a particular class of consumers is misleading or deceptive is a question of fact to be resolved by a consideration of the whole of the impugned conduct in the circumstances in which it occurred: Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [24]-[25] per French CJ, at [102] per Gummow, Hayne, Heydon and Kiefel JJ; TPG at [49]; Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301 at [74] per Perram J.

188    In TPG, French CJ, Crennan, Bell and Keane JJ observed at [50] that misleading or deceptive conduct may occur, not only when a contract has been concluded under the influence of a misleading advertisement, but also at the point where members of the target audience have been enticed into “the marketing web” by an erroneous belief engendered by an advertiser, even if the consumer may come to appreciate the true position before a transaction is concluded.

189    The ACCC bears the burden of proof, and must establish its allegations on the balance of probabilities having regard to factors including those referred to in s 140 of the Evidence Act.

APPLICATION OF PRINCIPLES TO THE FACTS OF THIS CASE

190    The ACCC alleges that Trivago engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law. The ACCC also alleges that Trivago contravened ss 29(1)(i) and 34 of the Australian Consumer Law. The ACCC’s case relates to the Relevant Period, which is broken down into the following relevant sub-periods:

(a)    the first relevant sub-period, that is, the period from 1 December 2016 to 29 April 2018;

(b)    the second relevant sub-period, that is, the period from 29 April 2018 to 20 November 2018;

(c)    the third relevant sub-period, that is, the period from 20 November 2018 to 13 February 2019; and

(d)    the fourth relevant sub-period, that is, the period from 13 February 2019 to 13 September 2019.

191    It is convenient to structure the consideration of the ACCC’s case around the four relevant sub-periods.  By considering the ACCC’s case with respect to each relevant sub-period in chronological order (rather than, for example, considering each alleged representation), one is better able to assess the relevant context for the purposes of considering whether Trivago engaged in the alleged contraventions. However, before considering each of the relevant sub-periods, I will consider the relevant class of consumers.

Relevant class of consumers

192    The relevant class of consumers for present purposes is those members of the public looking to book accommodation online. It may be expected that ordinary and reasonable members of this class of consumers have some familiarity with using the internet and making bookings (whether for accommodation or other products or services) online. I would not assume that such consumers have used the Trivago website before or that they have booked accommodation online before. I note that the relevant class is very large, as indicated by the figures set out in [88] above. While those figures do not state the number of consumers who accessed the Trivago website, they indicate that there were a large number of sessions on the website. For example, in the period 1 December 2016 to 3 January 2018, there were 20,039,530 sessions on the Trivago website where the Top Position Offer for any hotel listing was clicked. The evidence does not establish how long consumers are likely to spend on the Trivago website. The First Parkes Report refers at [131] to a study called “TripAdvisor Insights” which found that the average hotel purchaser spends 191.4 minutes researching online and visits 34 sites before making a purchase. Professor Parkes did not himself carry out a study about this matter and there is a question as to the weight that can be ascribed to it. In any event, I consider it unlikely that many consumers would spend this period of time (or anything approaching it) on the Trivago website. The whole point of the Trivago website, as explained in Trivago’s advertising (see, for example, the television advertisement at [3] above) was to save the consumer time by not needing to search many different websites. Further, Professor Slonim’s evidence regarding ‘satisficers’ suggests that many consumers are likely to interact only briefly with the website.

The first relevant sub-period

193    In respect of the first relevant sub-period, the ACCC alleges the following representations and conduct:

(a)    the Cheapest Price Representation;

(b)    the Strike-Through Representation;

(c)    the Top Position Representation; and

(d)    the additional conduct allegations.

194    In relation to the Cheapest Price Representation, the ACCC alleges that Trivago contravened ss 18 and 34 of the Australian Consumer Law. In respect of the Strike-Through Representation and the Top Position Representation, the ACCC alleges contravention of ss 18 and 29(1)(i). In respect of the additional conduct allegations, the ACCC alleges contravention of ss 18 and 34.

195    Although Trivago has made admissions in relation to the ACCC’s case based on the Cheapest Price Representation and the Strike-Through Representation in the first relevant sub-period (see [34] above), it is appropriate to deal briefly with these parts of the ACCC’s case, as they provide context for consideration of the other issues, and because Trivago’s admissions do not precisely mirror the ACCC’s case.

Cheapest Price Representation

196    The terms of the Cheapest Price Representation are as follows. It is alleged that Trivago represented in online and television advertising that the Trivago website would quickly and easily identify the cheapest rates available for a hotel room responding to a consumer’s search. This representation is alleged only in respect of the first relevant sub-period. I note for completeness that in the ACCC’s written closing submissions at [12], the ACCC alleges that Trivago continued to make the Cheapest Price Representation until 14 January 2019. However, this is inconsistent with the Originating Application (the first declaration sought) and the Concise Statement (at [4]), which rely on the Cheapest Price Representation only in relation to the first relevant sub-period (i.e., until 29 April 2018). I proceed on the basis of the Originating Application and the Concise Statement.

197    Trivago’s advertising and marketing during the first relevant sub-period (or parts of that period) are described in [46]-[52] above. In particular, I note that:

(a)    In the television advertisement that is set out in [3] above (which was aired between 10 January 2016 and 26 September 2017), it was stated that “Trivago makes it easy for you to find the ideal hotel at the best price” and that Trivago shows you all the different prices for the exact same room, and that’s how you can be sure that you find your ideal hotel for the best price”.

(b)    In the television advertisement that is set out in [49] above (which was aired in the period 29 June 2017 to 1 April 2018), it was stated that “Trivago compares prices from more than 200 websites to make sure you find your ideal hotel for the best price”.

(c)    In the television advertisement that is set out in [50] above (which was aired between 19 December 2017 and 1 April 2018), the consumer was urged to “use Trivago to compare these offers and find your ideal hotel for the best price”.

198    In each case, when the words “best price” are seen in context, it is clear that they refer to the cheapest price (rather than, for example, the best price taking into account the particular features of the various offers). The television advertisements conveyed that the Trivago website aggregates and displays offers that are comparable apart from price. For example, the advertisements set out in [3], [47(b)] and [49] above state that Trivago is showing you all the different prices “for the exact same room”. Further, the focus of the advertisements is on comparing the different prices that are available for a hotel. In this context, the words “best price” would be understood by the ordinary consumer to mean the cheapest price.

199    Further, the television advertisements indicated that the Trivago website would quickly and easily help the consumer identify the best price. That was the whole point of the Trivago website. For example, in the advertisement set out in [3] above, it was stated that Trivago “does the work for you and instantly compares the prices”.

200    There is no reason to think that the comments set out in the two preceding paragraphs do not apply equally to the other television advertisements described in [47]-[50] above.

201    The Google snippet set out at [52] above refers both to “the ideal hotel at the best price” and finding the “cheapest price”. Thus it contains a representation that the Trivago website would identify the cheapest price. The snippet refers to comparing “over 250 booking sites”, suggesting that the Trivago website would quickly and easily help the consumer identify the best price.

202    In light of the above, and also having regard to the admissions made by Trivago, it is established that Trivago made the Cheapest Price Representation during the first relevant sub-period. I note for completeness that various changes were made to the Trivago website from 5 December 2017 (see [68] above). However, I do not consider any of these changes to affect the conclusion that the Cheapest Price Representation was made.

203    In making the Cheapest Price Representation during the first relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. That is because the Trivago website did not quickly and easily identify the cheapest rates available for a hotel room responding to a consumer’s search. The Trivago website does not display offers unless the Online Booking Site’s CPC bid exceeds a minimum threshold set by Trivago. Accordingly, in at least some cases, the cheapest offer for the hotel room did not appear on the Trivago website. This fact alone was sufficient to render the Cheapest Price Representation misleading or deceptive (or likely to mislead or deceive).

204    Further, 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. (These figures are based on both the offers that were displayed on the website and the offers that were not displayed because they did not meet the minimum CPC. This is because the dataset provided to the computer science experts included all offers, including those that did not meet the minimum CPC.) 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. Although the computer science experts differed in their responses to question 3, even on Professor Parkes’s approach, the CPC is a very significant factor in determining the Top Position Offer; it is the second most important factor, with a relative importance of between 33.8% and 44.8% (see [115] above).

205    In making the Cheapest Price Representation during the first relevant sub-period, Trivago also engaged in conduct that was liable to mislead the public as to the nature, characteristics and suitability for purpose of the accommodation search service provided by the Trivago website, and thus contravened s 34 of the Australian Consumer Law. In circumstances where Trivago admitted that its conduct contravened s 34 of the Australian Consumer Law, the parties’ submissions did not focus on the various elements of this provision. In my view, the specific elements of this provision are satisfied. For the same reasons as set out above, the Cheapest Price Representation was not only misleading or deceptive (or likely to mislead or deceive), it was also liable to mislead the public, in the sense of creating an actual probability of the public being misled. Further, the conduct related to the nature, characteristics and suitability for purpose of the accommodation search service provided by the Trivago website.

Strike-Through Representation

206    The terms of the Strike-Through Representation are as follows. It is alleged that Trivago represented that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel.

207    The way in which the Strike-Through Price was depicted during the first relevant sub-period can be seen from the screenshots set out in [65] above. The Strike-Through Price appeared in red, strike-through text, immediately above the Top Position Offer. It was a similar size to the Top Position Offer. The implicit representation that was conveyed was that the two offers that were juxtaposed, namely the Strike-Through Price and the Top Position Offer, were comparable offers apart from price; in other words, that the offers were, apart from price, ‘like for like’. This is the natural inference from the presentation of the Trivago website. It is also supported by Professor Slonim’s evidence, particularly the evidence set out in [159] above. The implicit representation was accentuated by the Percentage Savings box (when this appeared), but the inference arose even when that box did not appear. Further, at least until 29 March 2018, there was no indication on the Trivago website that the offers were not comparable (apart from price). In light of these matters, I consider that, at least until 29 March 2018, Trivago represented that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel.

208    As noted above, on or about 29 March 2018, a hover-over was added in respect of the Strike-Through Price. If a consumer’s mouse cursor hovered over the Strike-Through Price, the following text was displayed:

The strike-through price corresponds to the cheapest offer we received from the most expensive booking site on trivago for this hotel and your stay dates.

209    There is a question whether any statement contained in the hover-over would be sufficient to dispel the impression that the Strike-Through Price and the Top Position Offer were comparable offers (apart from price), because consumers may not place their mouse cursor over the Strike-Through Price and thus may not see the hover-over. In any event, in my view the wording of this hover-over is confusing, and does not dispel the impression that the Strike-Through Price and the Top Position Offer were comparable offers (apart from price). Importantly, the hover-over does not actually state that the Strike-Through Price may relate to a different room category. In light of these matters, even after 29 March 2018, I consider that Trivago represented that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel.

210    In making the Strike-Through Representation during the first relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. Trivago has admitted (see [34] above) that the Strike-Through Price did not always relate to the same room category as the Top Position Offer. Trivago has admitted that its conduct in this regard contravened s 18.

211    For the same reasons, in making the Strike-Through Representation during the first relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services, and thus contravened s 29(1)(i) of the Australian Consumer Law. I note that Trivago has also admitted that its conduct in this regard contravened s 29(1)(i).

Top Position Representation

212    The terms of the Top Position Representation are as follows. It is alleged that Trivago represented 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. I note that the alleged representation has two limbs; it is alleged that Trivago represented that the Top Position Offers were either the cheapest available offers (the first limb) or that they had some other characteristic which made them more attractive than any other offer for that hotel (the second limb).

213    In determining whether that representation was conveyed by Trivago, by the Trivago website, it is necessary to consider the online context as well as the formatting (including fonts and colours) used by Trivago on the website. The Top Position Offer was presented in the far right column, in green, and a relatively large font (compared with the other offers displayed on the Initial Search Results Page). It had white space around it, and there was a green “View Deal” button below it. The green colour has positive associations, suggesting that the consumer should go ahead with this offer. The overall impression was that the Top Position Offer was the best offer for the hotel, either in terms of price or some other characteristic. At least until 6 October 2017, there was no contrary indication on the Trivago website. In light of these matters, I consider that, at least until 6 October 2017, Trivago represented 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. Additional support for this finding is provided by some of the internal Trivago documents included in the Court Book, which indicate (as one would expect) an appreciation of the significance of formatting (including fonts and colours) (see, in particular, tabs 77, 85 and 162). For example, in the email at tab 77, an employee of Trivago wrote: “We know as a fact that changing the layout of prices, be it font sizes or colours, has a significant impact on user behaviour and, thus, on conversion.”

214    As noted above, on or about 6 October 2017, the Trivago website began displaying the Our Recommendations information button with a hover-over. If a consumer’s mouse cursor hovered over the Our Recommendations information button, the hover-over would display text stating:

trivago gives you the opportunity to compare different offers for hotel rooms that are available through trivago’s website. In some cases, lower prices might be available from other sources. In determining the price to display in the leading position of our search results, we consider a variety of factors, including price, the likelihood that you will find your ideal hotel, your ability to complete a booking after you click on a search result and the level of compensation provided by the booking sites we cover. In order to make more information available on pricing options to our users, additional prices are listed in the “More deals” slide-out.

215    From about 27 January 2018, the text displayed if a consumer’s mouse cursor hovered over the Our Recommendations information button stated:

The ranking results reflect your search criteria and our assessment of the attractiveness of the offer compared to other offers available on our site. It also reflects the compensation paid by the booking site.

216    There is a question whether any statement contained in the hover-over would be sufficient to dispel the impression created by the presentation of the Top Position Offer on the website as discussed above, because consumers may not place their mouse cursor over the Our Recommendations information button and thus may not see the hover-over. In any event, the explanation provided by these hover-overs is opaque, and insufficient to dispel the impression created by the presentation of the Top Position Offer.  The hover-overs referred to the “compensation paid by the booking site”. The hover-overs did not explicitly state that this compensation was being paid to Trivago. Moreover, the word “compensation” does not readily convey the nature of the CPC mechanism, whereby an Online Booking site was required to pay a fee to Trivago each time a consumer clicks on one of its offers. Finally, the hover-overs did not clearly disclose the significance of the CPC in the selection of the Top Position Offer.

217    Apart from the introduction of the hover-over, another change Trivago made to the website during the first relevant sub-period was the change to the More Deals button. On or about 5 December 2017, the More Deals button ceased to show the number of further offers contained within the More Deals slide-out and instead displayed the price of the cheapest deal contained in the More Deals slide-out. In circumstances where this figure was less than the Top Position Offer, a consumer would be able to determine from the face of the listing that the Top Position Offer was not the cheapest offer for the hotel. On this basis, Trivago submits that it did not make the Top Position Representation after 5 December 2017. In my view, there are at least two difficulties with this submission. First, assuming that the figure in the More Deals button was lower than the Top Position Offer, the figure appearing in the More Deals button was in a much smaller font than the Top Position Offer. It was also in black, rather than green, and at the bottom of a column containing other figures. Having regard to the way in which the figures were presented (see, eg, the screenshots at [65] above), I consider that some, perhaps many, consumers would not have observed the figure in the More Deals button and appreciated that it was less than the Top Position Offer. Secondly, I consider that, of the consumers who did observe the figure in the More Deals button and did appreciate that it was less than the Top Position Offer, some, perhaps many, would have nonetheless understood the Top Position Offer as being either the cheapest offer or having some other characteristic which made it more attractive than any other offer for the hotel. That impression was invited by the colour and relative size and positioning of the offers.

218    Accordingly, I consider that, even after the introduction of the hover-over (in connection with the Our Recommendations information button) and the change to the More Deals button, Trivago represented 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. This conclusion draws additional support from the click-through figures set out in [88] above, which show that there were 4,726,241 sessions where the More Deals slide out was displayed, compared with 20,039,530 sessions where the Top Position Offer for any hotel listing was clicked.

219    In making the Top Position Representation during the first relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. Contrary to the Top Position Representation, in many cases the Top Position Offer was not the cheapest offer for the hotel, nor did it have some other characteristic that made it more attractive than any other offer for the hotel. As noted above, the Trivago website does not display offers unless the Online Booking Site’s CPC bid exceeds a minimum threshold set by Trivago. Accordingly, in at least some cases, the cheapest offer for the hotel was not displayed on the Trivago website.

220    Also, as noted above, the expert evidence establishes that higher priced offers were selected as the Top Position Offer over alternative lower priced offers in 66.8% of listings. Accordingly, in many cases, the Top Position Offer was not the cheapest offer for the hotel.

221    Further, it may be inferred that in at least some cases where the Top Position Offer was not the cheapest offer, it did not have some other characteristic or characteristics that made it more attractive than any other offer for the hotel. The Top Position algorithm does not use non-price attributes of the offers to determine the composite score (and thus the Top Position Offer). As noted above, a very significant factor in the selection of the Top Position Offer is the CPC, that is, the amount that Trivago will be paid by Online Booking Sites (rather than the quality of the hotel accommodation offer). Insofar as Professor Parkes analysed certain cases where the Top Position Offer was at least 1% more than the cheapest offer and drew an inference that the CPC was conveying information about the quality of the underlying offer, for the reasons set out at [144] I am not satisfied that such an inference should be drawn. Further, as noted at [145], Professor Parkes did not seek to value the non-price attributes, and did not consider offers that were excluded because they did not meet the minimum CPC. His analyses do not, therefore, provide a basis to compare the relative value of the Top Position Offer and the lowest price offer. Insofar as Mr Smith expressed the view, based on economic theory, that the CPC is likely to act as a proxy for factors that are related to the quality and attractiveness of the offer, for the reasons set out at [177] above, I give that opinion very little weight. I note for completeness Trivago’s submission that, because the priority modifier was correlated with the landing page score, in this way the quality of the Online Booking Site’s website was taken into account. However, for reasons given above, the evidence does not establish how the landing page score in fact operated in practice. I am not prepared to infer that it operated as a quality measure in this way in the absence of evidence from a person with personal knowledge of this matter. Further and in any event, this point at best relates to the quality of the website rather than to the quality of the hotel accommodation offer. As I see it, the second limb of the Top Position Representation is concerned with the hotel accommodation offer rather than with the quality of the Online Booking Site’s website.

222    For the same reasons, in making the Top Position Representation during the first relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services (and thus contravened s 29(1)(i) of the Australian Consumer Law).

Additional conduct allegations

223    The ACCC alleges that, by making the Cheapest Price Representation, and by making Top Position Offers together with the Top Position Representation and the Strike-Through Representation, during the first relevant sub-period, Trivago 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.

224    I have concluded, above, that Trivago made the Cheapest Price Representation, the Strike-Through Representation and the Top Position Representation during the first relevant sub-period. Considering this conduct as a whole, I am satisfied that Trivago did lead 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. For example, in the television advertisement set out at [3] above, the presenter referred to the fact that there are so many different prices out there (i.e. online) “for the exact same room”. She said that Trivago “does the work for you and instantly compares the prices of over 600,000 hotels from over 200 different websites”. It was said that, instead of “searching for hours”, Trivago “makes it easy for you” to find the ideal hotel for the best price. The presenter said that you just go to Trivago, type in where you want to go, and “with two clicks” select your check-in and check-out dates and search; “It’s that simple”. It was said that Trivago shows you all the different prices “for the exact same room”. The overall impression was that Trivago was impartial, objective and transparent. Although not as lengthy and detailed, the other television advertisements were to similar effect. The Strike-Through Representation and the Top Position Representation were consistent with the messages conveyed in the television advertisements. While changes were made to the Trivago website during the course of the first relevant sub-period (see [68] above), I do not consider these sufficient to dispel the impression created by the television advertisements.

225    I am satisfied that, by engaging in the conduct described in the preceding paragraph during the first relevant sub-period, Trivago engaged in conduct that was misleading and deceptive or likely to mislead or deceive (and thus contravened s 18 of the Australian Consumer Law) and conduct that was liable to mislead the public as to the nature, characteristics and suitability for purpose of the accommodation search service provided by the Trivago website (and thus contravened s 34 of the Australian Consumer Law). Contrary to the impression created by the relevant conduct, the Trivago website did not provide an impartial, objective and transparent price comparison service. In fact, the selection of the Top Position Offer was heavily influenced by the CPC, that is, the amount Trivago would be paid if a consumer clicked on the offer. The fact that Trivago was being paid by the Online Booking Sites was not made clear. Many consumers would not have appreciated that Trivago was being paid by the Online Booking Sites, let alone that the amount it was being paid was a very significant factor in the selection of the Top Position Offer. Further, for the reasons given at [203]-[204] above, the Trivago website did not quickly and easily identify the cheapest rates available for a hotel room responding to a consumer’s search. Importantly, in at least some cases, the cheapest offer for a hotel room was filtered out and therefore did not appear on the Trivago website.

The second relevant sub-period

226    In respect of the second relevant sub-period (29 April 2018 to 20 November 2018), the ACCC alleges the following representations and conduct:

(a)    the Strike-Through Representation;

(b)    the Top Position Representation; and

(c)    the additional conduct allegations.

Strike-Through Representation

227    For ease of reference, I set out again the terms of the Strike-Through Representation. It is alleged that Trivago represented that the Strike-Through Price was a comparison between the prices offered for the same room category in the same hotel.

228    The format and appearance of the Strike-Through Price was essentially the same during the second relevant sub-period as during the first relevant sub-period. Accordingly, at least until August 2018, the reasoning in [207]-[211] above is equally applicable.

229    In August 2018, the text displayed if a consumer’s mouse cursor hovered over the Strike-Through Price was amended to state:

This is the cheapest deal from the most expensive booking site with offers for this hotel on your stay dates.

230    Again, there is a question whether any statement contained in the hover-over would be sufficient to dispel the impression that the Strike-Through Price and the Top Position Offer were comparable offers (apart from price). In any event, the reasoning set out in [209] is equally applicable to the amended wording of the hover-over. That is, the wording of this hover-over is confusing, and does not dispel the impression that the Strike-Through Price and the Top Position Offer were comparable offers (apart from price). In light of these matters, even after the change in the wording of the hover-over, I consider that Trivago represented that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel.

231    In making the Strike-Through Representation during the second relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. Trivago has admitted (see [34] above) that the Strike-Through Price did not always relate to the same room category as the Top Position Offer. Trivago has admitted that its conduct in this regard contravened s 18.

232    For the same reasons, in making the Strike-Through Representation during the second relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services (and thus contravened s 29(1)(i) of the Australian Consumer Law). I note that Trivago has admitted that its conduct in this regard contravened s 29(1)(i).

Top Position Representation

233    As noted above, the terms of the Top Position Representation are as follows. It is alleged that Trivago represented 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.

234    The way in which listings appeared on the Trivago website during the second relevant sub-period was similar to the first relevant sub-period: see [71]-[72] above. One difference was the change to the wording on the Landing Page. Since 12 April 2018 (i.e. just before the start of the second relevant sub-period), the words on the Landing Page have read: “Find your ideal hotel and compare prices from different websites”. In addition, from 3 July 2018, a link called “Learn how trivago works” was introduced. This provided information about Trivago’s algorithm and ranking of offers. In about October 2018, a link to the “Learn how trivago works” page appeared in the hover-over for the Our Recommendations information button, as described in [73(b)] above.

235    As noted above, in determining whether the Top Position Representation was conveyed by Trivago, by the Trivago website, it is necessary to consider the online context as well as formatting (including fonts and colours) used by Trivago on the website. The various matters identified in [213] were equally true during the second relevant sub-period. For the same reasons, the overall impression was that the Top Position Offer was the best offer for the hotel (either in terms of price or some other characteristic).

236    The discussion of the hover-overs in [214]-[216] above is equally applicable in respect of the second relevant sub-period. The discussion of the More Deals button in [217] above is also equally applicable in respect of the second relevant sub-period.

237    Although the wording of the Landing Page was different during the second relevant sub-period, I do not consider this to affect whether or not the Top Position Representation was conveyed. The new wording, which refers to comparing prices from different websites, is neutral as to whether or not the representation was made.

238    In light of the above, I consider that, at least until 3 July 2018, Trivago represented 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.

239    The link that was introduced on about 3 July 2018 provided information about Trivago’s algorithm and ranking of offers on the Initial Search Results Page. There is a question whether a consumer would be likely to click on the link. I note, in this regard, that it is not clear from the statement of agreed facts where the link appeared on the Trivago website. In light of these matters, even after the introduction of this link, the impression created by the presentation of the Top Position Offer was the same as discussed above.

240    In relation to the link that was introduced in about October 2018, there is a question whether a consumer would be likely to click on the link, which was itself contained in a hover-over. In any event, the explanation provided in the linked page, which was entitled “How does trivago determine the ‘our recommendations’ sort” (see [73(b)] above), does not explain in clear terms the significance of the CPC in the selection of the Top Position Offer, but rather downplays its role by referring to it last after a number of other factors. The second paragraph of the page states that the consumer may find offers in the More Deals slide-out with a lower price than the Top Position Offer. However, it does not state that Trivago filters out offers that do not meet its minimum CPC threshold and that these offers, which may be cheaper, do not appear at all. The statement that, while price is an important factor when selecting the Top Position Offer, “we believe other factors, such as those mentioned above, make offers attractive and relevant to you, and contribute to high levels of satisfaction by our users” tends to suggest that, if the Top Position Offer is not the cheapest offer, this is because the offer has non-price characteristics that make it more attractive than the cheapest offer. This is consistent with, and may even support, the proposition that Trivago made the Top Position Representation.

241    Accordingly, I consider that, even after the introduction of the links on 3 July 2018 and in October 2018, Trivago represented 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.

242    In making the Top Position Representation during the second relevant sub-period, Trivago engaged in conduct that was misleading and deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. The reasoning in [219]-[221] above applies equally here.

243    For the same reasons, in making the Top Position Representation during the second relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services, and thus contravened s 29(1)(i) of the Australian Consumer Law.

Additional conduct allegations

244    The ACCC alleges that, by making Top Position Offers on the Trivago website, making the Top Position Representation, making the Strike-Through Representation, and advertising the Trivago website as set out in [27] above, Trivago 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.

245    I have concluded, above, that Trivago made the Strike-Through Representation and the Top Position Representation during the second relevant sub-period. Further, Trivago’s television advertisements continued until 2 July 2018. In addition to the television advertisement referred to in [47(c)] above (which aired until 2 July 2018), the Court Book at tab 37 includes a television advertisement that was aired between 26 September 2017 and 2 July 2018. Although not in precisely the same terms, this advertisement reiterates themes from the earlier television advertisements. Considering this conduct as a whole, I am satisfied that, at least until 2 July 2018, Trivago 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.

246    In relation to the period after 2 July 2018, there is no evidence that Trivago conducted television advertising. Insofar as the ACCC relies on other forms of advertising, I note the following matters in relation to the period after 2 July 2018:

(a)    In the Concise Statement at [20(b)], the ACCC relies on the advertising alleged in [6] and [8A] of the Concise Statement. In [6], the ACCC refers to a snippet that appeared in Google search results between 1 December 2016 and a date that is not known to the ACCC but was not before 14 January 2019. It is alleged that the snippet stated: “Compare over 250 booking sites and find the ideal hotel at the best price!”; and “Compare hotels, find the cheapest price and guarantee the best deal on accommodation …”.

(b)    In [8A] of the Concise Statement, the ACCC states:

Since on or around 15 April 2018, the Trivago website has stated: Find your ideal hotel and compare prices from different websites. Trivago has also caused the following statements to be made in the snippet which appeared beneath search results displayed when Australian consumers conducted an online search for trivago; Compare 200+ booking sites globally, find the ideal hotel at great price! Find the perfect hotel. Free and Easy to Use. Fast and Simple. 1M+ Hotels Worldwide. High-quality hotel photos. Compare & Save. No Ads or Pop-upsand Compare 200+ booking sites globally, find the ideal hotel at great price! Many prices in one site. Save Time & Money. Enjoy Your Stay. Impartial Comparison. Compare Booking Sites. 1M+ Hotels Worldwide. Act Fast for Great Deals.”

(c)    Insofar as the ACCC relies on snippets, the statement of agreed facts contains an agreed fact relating to a snippet (at [12]), but it concerns a period before 2 July 2018. Trivago has made admissions regarding the snippet (as set out in [34] above), but these also relate to a period before 2 July 2018. Trivago has admitted that on or about 14 January 2019, it came to its attention that the words “best price” appeared in a subset of Google unpaid Trivago-related search results in Australia (the admission was set out in a letter from KWM dated 16 April 2019, which is CB tab 60). However, that letter only goes so far as to say that the snippet contained the words “best price”. It does not set out the rest of the wording of the snippet. Accordingly, there does not appear to be evidence to support the ACCC’s allegations concerning snippets. I note that the paragraph of the ACCC’s written closing submissions dealing with the additional conduct allegations ([52]) does not include any evidentiary references.

(d)    Insofar as the ACCC relies on statements on the Trivago website itself, it is true that, during the second relevant sub-period, the Trivago website stated: “Find your ideal hotel and compare prices from different websites”.

247    In respect of the period after 2 July 2018, I am not satisfied that, by making Top Position Offers on the Trivago website, making the Top Position Representation and the Strike-Through Representation, and stating “Find your ideal hotel and compare prices from different websites” on the Trivago website, Trivago 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 Top Position Representation and the Strike-Through Representation do not convey all aspects of this allegation. I do not consider that the allegation is to be inferred from the collection of all the matters relied on by the ACCC and established by the evidence. The position is different from the period before 2 July 2018 (discussed above), when Trivago conducted television advertising that conveyed these messages. Accordingly, in respect of the period after 2 July 2018, I am not satisfied that Trivago engaged in the alleged conduct.

248    I am satisfied that, by engaging in the conduct described in [244] above up to 2 July 2018 in the second relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive (and thus contravened s 18 of the Australian Consumer Law) and conduct that was liable to mislead the public as to the nature, characteristics and suitability for purpose of the accommodation search service provided by the Trivago website (and thus contravened s 34 of the Australian Consumer Law). The reasoning in [225] above is equally applicable to this conduct.

The third relevant sub-period

249    In respect of the third relevant sub-period (20 November 2018 to 13 February 2019), the ACCC alleges the following representations and conduct:

(a)    the Strike-Through Representation (in respect of the map portion of the website);

(b)    the Red Price Representation;

(c)    the Top Position Representation; and

(d)    the additional conduct allegations.

Strike-Through Representation

250    The terms of the Strike-Through Representation, as noted above, are as follows. It is alleged that Trivago represented that the Strike-Through Price was a comparison between the prices offered for the same room category in the same hotel.

251    The statement of agreed facts establishes that the Strike-Through Price continued to appear in the map portion of the Trivago website during the third relevant sub-period (see [76(a)] above, which is based on the statement of agreed facts). The statement of agreed facts does not, however, include a screenshot of the map portion of the website. An indication of how the map portion of the Trivago website is accessed is indicated in the top left of the screenshot in [79] above (the box that includes the words “View Map”).

252    Although a screenshot is not available, I infer that the Strike-Through Price appeared immediately above or, at least, close to the Top Position Offer. The implicit representation conveyed by this positioning was that the two offers were comparable apart from price; in other words, that the offers were, apart from price, ‘like for like’. In light of this, I consider that Trivago represented that the Strike-Through Price was a comparison between prices offered for the same room category in the same hotel.

253    In making the Strike-Through Representation in the map portion of the Trivago website during the third relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. Trivago has admitted (see [34] above) that “the room rate [i.e. the Strike-Through Price] did not always relate to the same room category as the Top Position Offer”. While that admission was made in the context of the period up to 20 November 2018 (the date when Trivago ceased using the Strike-Through Price on the Initial Search Results Page), it appears that the proposition also applies to the Strike-Through Price in the map portion during the third relevant sub-period. This may be inferred from the Red Price hover-over, which included the statement that the Red Price “may relate to a room type or amenities package that differs from other offers on our site” (see [75(b)] above).

254    For the same reasons, in making the Strike-Through Representation in the map portion during the third relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services, and thus contravened s 29(1)(i) of the Australian Consumer Law.

Red Price Representation

255    The terms of this representation are as follows. The ACCC alleges that Trivago represented that the Red Price was a comparison between prices offered for the same room category in the same hotel.

256    The way in which the Red Price was depicted during the third relevant sub-period can be seen from the screenshot set out in [74] above. The Red Price appeared in red text in the same column as the Top Position Offer. No other offers were set out in that column of the listing for the hotel. Although the Red Price was a smaller size than the Top Position Offer, the presentation of both offers in the same column of the listing conveyed that the two offers were comparable offers apart from price; in other words, that the offers were, apart from price, ‘like for like’. This is the natural inference from the way the two offers were presented. It is also supported by Professor Slonim’s evidence, albeit generally expressed in terms of the Strike-Through Price.

257    Throughout the third relevant sub-period, if a consumer’s mouse cursor hovered over the Red Price, the following text was displayed:

For your stay dates, this is the cheapest deal from the most expensive booking site with offers for this hotel. It may relate to a room type or amenities package that differs from other offers on our site.

258    Again, there is a question whether any statement contained in the hover-over would be sufficient to dispel the impression that the Red Price and the Top Position Offer were comparable offers (apart from price). Further, in my view the wording of the hover-over is confusing, and does not dispel the impression that would otherwise be given that the Red Price and the Top Position Offer were comparable offers (apart from price).

259    In light of the above, and notwithstanding the hover-over, I consider that Trivago represented that the Red Price was a comparison between prices offered for the same room category in the same hotel.

260    In making the Red Price Representation during the third relevant sub-period, Trivago engaged in conduct that was misleading and deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. It can be inferred from the second sentence of the hover-over that the Red Price did not always relate to the same room category as the Top Position Offer. There is no evidence from any officer or employee of Trivago to the contrary.

261    For the same reasons, in making the Red Price Representation during the third relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services, and thus contravened s 29(1)(i) of the Australian Consumer Law.

Top Position Representation

262    The terms of the Top Position Representation have been set out at [212] above.

263    Save for the change from the Strike-Through Price to the Red Price, the appearance of the Trivago website was substantially the same during the third relevant sub-period as it had been during the last part of the second relevant sub-period (that is, from about October 2018). Accordingly, the reasoning set out in [240]-[243] above, as it relates to the period from about October 2018, is equally applicable. I therefore reach the same conclusions as set out in that section with respect to the third relevant sub-period.

Additional conduct allegations

264    The ACCC’s allegations regarding additional conduct are the same for the third relevant sub-period as for the second relevant sub-period. The reasoning set out at [246]-[247] above in respect of the period after 2 July 2018 is equally applicable in respect of the third relevant sub-period. Accordingly, in respect of the third relevant sub-period, I am not satisfied that Trivago engaged in the alleged conduct.

The fourth relevant sub-period

265    In respect of the fourth relevant sub-period (13 February 2019 to 13 September 2019), the ACCC alleges the following representations and conduct:

(a)    the Red Price Representation;

(b)    the Top Position Representation; and

(c)    the additional conduct allegations.

Red Price Representation

266    The terms of the Red Price Representation have been set out at [255] above.

267    The way in which the Red Price was depicted during the fourth relevant sub-period was essentially the same as during the third relevant sub-period. Accordingly, the description in [256] is equally applicable to the fourth relevant sub-period.

268    The description of the hover-over in [257] above is also applicable to the fourth relevant sub-period. The reasoning in [258] above, in relation to the hover-over, also applies to the fourth relevant sub-period.

269    The main difference between the third and fourth relevant sub-periods was the removal of the Strike-Through Price from the map portion of the website. This does not affect the reasoning in relation to the Red Price Representation.

270    On about 17 April 2019, during the course of the fourth relevant sub-period, the words “How payments to us affect ranking” were added next to the Our Recommendations information button. I do not consider the addition of these words to affect the analysis regarding the Red Price Representation.

271    In light of the above, I consider that Trivago represented that the Red Price was a comparison between prices offered for the same room category in the same hotel.

272    In making the Red Price Representation during the fourth relevant sub-period, Trivago engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and thus contravened s 18 of the Australian Consumer Law. Again, it can be inferred from the second sentence of the hover-over in relation to the Red Price (see [257] above) that the Red Price did not always relate to the same room category as the Top Position Offer. Again, there is no evidence from any officer or employee of Trivago to the contrary.

273    For the same reasons, in making the Red Price Representation during the fourth relevant sub-period, Trivago, in connection with the supply or possible supply of accommodation services, made misleading representations with respect to the price of those services, and thus contravened s 29(1)(i) of the Australian Consumer Law.

Top Position Representation

274    The terms of the Top Position Representation have been set out at [212] above.

275    Save for the introduction of the words “How payments to us affect ranking” next to the Our Recommendations information button, the appearance of the Trivago website was substantially the same during the fourth relevant sub-period as it had been during the third relevant sub-period.

276    While the words added next to the Our Recommendations information button may draw a consumer’s attention to the button and therefore the hover-over associated with that button, there are deficiencies with the wording of the hover-over and the link included in that hover-over (see [239]-[240] above). Accordingly, notwithstanding the addition of those words, the reasoning in relation to the third relevant sub-period (see [263] above), which in turn adopts the reasoning in relation to the period from October 2018 in the second relevant sub-period, is equally applicable. I therefore reach the same conclusions in relation to the fourth relevant sub-period.

Additional conduct allegations

277    The ACCC’s allegations regarding additional conduct in relation to the fourth relevant sub-period are similar to the allegations relating to the second and third relevant sub-periods (see [28] above). The reasoning set out at [246]-[247] above in respect of the period after 2 July 2018 in the second relevant sub-period is equally applicable in respect of the fourth relevant sub-period. Accordingly, in respect of the fourth relevant sub-period, I am not satisfied that Trivago engaged in the conduct alleged.

CONCLUSION

278    For these reasons, I have reached the conclusions summarised in [15] above. I will list the matter for case management on a date to be fixed. There will need to be a hearing in relation to relief, including pecuniary penalties. I will hear from the parties at the case management hearing as to whether declarations should be made at this stage or after the further hearing.

I certify that the preceding two hundred and seventy-eight (278) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.

Associate:

Dated:    20 January 2020