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Consumer - Travel Agents. Hoy v. Expedia Group, Inc.
In Hoy v. Expedia Group, Inc. (Div Court, 2024) the Divisional Court dismissed an appeal from a denial of a class action certification motion, here one grounded heavily in the Consumer Protection Act's 'misleading representations' provisions.
Here the court, in setting out the background for the case, describes leading commercial online travel agencies and their alleged practices:[7] The Plaintiffs are police officers who used the travel websites operated by Expedia Group and the Defendants, Booking Holdings Inc. and Booking.Com B.V. (the “Bookings Group”) to make accommodation reservations over the past decade. One of the Plaintiffs also used Trivago to be referred to Expedia and Bookings to make travel reservations.
[8] The Expedia and the Bookings Defendants are online travel agents (“OTAs”) that gather information from hotels and other accommodation providers and provide a search engine that allows users to sort and review information based on their preferences. The OTAs employ algorithms that sort results in response to inquiries made by those using their website.
[9] Travellers can conduct searches on the OTA websites free of charge. They can then, if they choose, book accommodations through the OTA platform. If a traveller ultimately makes a booking, the accommodation provider pays a commission to the OTA.
[10] Trivago operates under a different business model. It is an aggregator rather than an OTA. As an aggregator, it does not offer services for booking accommodations. Instead, trivago.ca displays accommodation offers from OTAs and refers users to their booking platforms. Like the other Defendants, Trivago does not charge users for its services and receives payments for its services from the OTAs with which it contracts.
The Impugned Practices and the Proposed Class Action
[11] The Plaintiffs assert that they were harmed as a result of the algorithms used by the Defendants. They claim that the Defendants displayed results in such a way as to coerce customers into making hotel bookings under false pretenses. These practices are referred to collectively as the “Advertising Practices” and are subdivided into three practices:(i) The Search Result Practice: The Search Result Practice arises from the Defendants creating the general impression that search results displayed in the Defendants’ platforms reflect the objective results of the travellers’ search criteria when, according to the Plaintiffs, they do not. Instead, the search results are influenced by the undisclosed, or inadequately disclosed, commissions paid to the Defendants. According to the Plaintiffs, the OTA Defendants charge accommodation providers varying rates of commissions in exchange for assigning the offered accommodations a higher numerical ranking score in the Defendants’ algorithms that generate search results. Similarly, online travel agencies, including the OTA Defendants, pay Trivago fees in exchange for displaying their offerings higher on the Trivago search results. As a result of this alleged practice, the Plaintiffs assert that the order in which accommodations are presented in search results depends in part on the amount of commission paid by the accommodation provider.
(ii) The Discount Practice: The Discount Practice refers to the Defendants’ practice of advertising the rate for accommodations as a “discount” as compared to the accommodation’s “regular” price. According to the Plaintiffs, the “regular “price of the accommodation is presented in a misleading way. It may be the highest rack rate charged by the accommodation provider or it may be a rack rate for a room that does not match the consumer’s search criteria, but it is rarely or ever the rate that a consumer would pay for that room but for the alleged “discount”.
(iii) The Urgency Practice: The Urgency Practice refers to the OTA Defendants’ practice of allegedly using false and/or misleading representations that there is urgency to complete a booking or else the opportunity to book the accommodation could be lost. The Urgency Practice includes representations that there is “one room left at this price”, use of a “fire icon”, and/or that a certain number of consumers are viewing the same property in circumstances where these claims are untrue or misleading because the statements do not reflect the actual availability of the accommodation offered. The Plaintiffs do not allege that Trivago engaged in the Urgency Practice. [12] In February of 2019, the Expedia Group, the Bookings Group and Trivago all entered into undertakings with the UK and European Commission regulators to resolve enforcement proceedings related to allegedly unfair or misleading practices used by those companies. The undertakings included commitments by the Defendants to, among other things, refrain from the Advertising Practices and/or commit to providing disclosure and information regarding the use of the Advertising Practices. The undertakings did not include admissions that the Defendants had actually engaged in these practices.
[13] The Australian Competition and Consumer Commission also took action under Australian consumer protection legislation against Trivago concerning the Search Result Practice and the Discount Practice. In January 2020, the Federal Court of Australia found that the Search Result Practice and the Discount Practice employed by Trivago were misleading and not dispelled by any disclaimers. Trivago was ordered to pay AUD 44.7 million for its misleading practices.
[14] According to the Plaintiffs, despite changing their practices in other jurisdictions, the Defendants have not made similar changes in Canada. It is only recently and, in certain cases, only after the commencement of these proceedings, that the Defendants began to provide very limited disclosure regarding the Advertising Practices in Canada on some, but not all, of their platforms. According to the Plaintiffs the current disclosure in Canada did not exist at the time of their bookings.
[15] No Canadian regulator has taken any enforcement proceedings against the Defendants.
[16] According to the Plaintiffs, because of the way the Defendants structured their ecosystems, it is not possible for them to calculate their compensatory damages.
[17] Dr. Charlotte Duke, an expert in the field of behavioural economics, provided evidence on the certification motion on the impact of the Advertising Practices. Behavioural economics is a field of study that combines economics and psychology to explain why people make the decisions they do, and how consumer decision-making is influenced by the way information is presented to them.
[18] Dr. Duke identified a range of harms that result to consumers from the use of the Advertising Practices. At a market level, the Advertising Practices lead to a reduction in competition by reducing the extent to which consumers search for accommodation, thereby increasing the prices paid by consumers for accommodation. At an individual level, the Advertising Practices harm consumers by causing them to pay more for accommodation than they would have done, purchase accommodation that met their needs less well than alternative accommodation and/or purchase accommodation which they perceive to be of higher quality than it actually is. Dr. Duke further opined that all three Advertising Practices, when used together, amplify the harm to consumers as compared to using the different Advertising Practices separately.
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