Australia's competition watchdog has accused online giant Trivago of rejecting cheaper deals for customers unless advertisers offered royalties deemed acceptable by the hotel comparison website.

The Australian Competition and Consumer Commission kicked off its case against Trivago in the Federal Court on Monday, producing memos that showed the website invited advertisers to pay more to "block" rival offers.

The ACCC has launched proceedings against Trivago.

The German-based website faces a multimillion dollar fine if the ACCC wins the case over accusations Trivago deceived customers when it claimed to offer the "best prices" for the "exact same rooms" from December 2016.

Instead, the ACCC says Trivago failed to properly disclose its operating model and used misleading "strike-through" price comparisons that compared a more expensive luxury room with a standard room.