Australia's consumer watchdog says online hotel booking site Trivago is one of several online comparison websites that could face severe penalties after a court ruled the German-based giant had misled consumers about hotel room rates.

Key points: On Monday the Federal Court ruled that Trivago had misled consumers that they were getting the cheapest hotel price on its online booking site

On Monday the Federal Court ruled that Trivago had misled consumers that they were getting the cheapest hotel price on its online booking site ACCC boss Rod Sims hopes to see the maximum penalty handed down against Trivago

ACCC boss Rod Sims hopes to see the maximum penalty handed down against Trivago Mr Sims says the ACCC will take other online comparison websites to court for allegedly misleading consumers

The Australian Competition and Consumer Commission (ACCC) is now looking at taking action against several other comparison websites in different industries, after winning its case against Trivago in the Federal Court.

The company, based in Germany but incorporated in Netherlands, had regularly promoted that its website helped identify the cheapest rates for a hotel by comparing booking sites such as Expedia, Hotels.com and Booking.com, as well as the hotels' own websites.

Trivago's main source of revenue is cost-per-click payments from advertisers who pay Trivago a fee each time a user clicks on an offer.

Mr Sims said, rather than being an "impartial and objective" price comparison service, Trivago prioritised the advertisers willing to pay the highest cost-per-click fee.

He said Trivago's conduct was "particularly egregious" as consumers may have been tricked into thinking they were getting great discounts, when in fact they were not.

"The rankings were largely based on which advertiser would pay them [Trivago] the most money," Mr Sims told ABC News.

"Most of the time what was highlighted wasn't the cheapest hotel deal, and therefore, consumers lost out."

He said if consumers had known they were not getting the best deal, they could have "done more digging" such as calling the hotel or checking the hotel website to find deals that would save them money.

Penalties are yet to be handed down by the court, but could potentially be millions of dollars.

"We will certainly be seeking the highest penalties we can get to send a message to Trivago, and to send a message to others, not to mislead consumers," Mr Sims said.

ACCC chairman Rod Sims says he will be closely monitoring whether Trivago starts informing consumers if hotel price rankings are based on advertising money. ( REUTERS: Jason Reed )

Trivago misled consumers more than 66 per cent of the time

Both the ACCC and Trivago called computer science experts to express opinions on the algorithm used by Trivago to select the 'Top Position Offer'.

Trivago's own data showed that in more than 66 per cent of listings, higher priced hotel offers were selected as the 'Top Position Offer' over alternative lower priced offers.

Justice Mark Moshinsky found that Trivago had "engaged in conduct that was misleading and deceptive or likely to mislead or deceive", and therefore had broken the law.

The court also looked at Trivago's use of strike-through prices.

It found hotel room rate comparisons that used strike-through prices, or text in different colours (for example green versus red), gave consumers a false impressions of savings.

"They weren't comparing like with like, they were often comparing a luxury room price to a standard room price," Mr Sims said.

"People [mistakenly] thought they were getting discounts when in fact they weren't. It's absolutely outrageous."

The ACCC launched action against Trivago in August 2018.

Trivago's television advertisements aired more than 400,000 times from December 2013, but in mid-2018 the company stopped using these ads featuring representations about price.

The court case centred around Trivago's television advertisements that ran from December 2016 to July 2018, and on Trivago's website from December 2016 to September 2019.

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Other online comparison sites to come under fire

Mr Sims said his message to other online comparison websites was: "Do not mislead consumers."

"If they're making their money out of promoting the company that pays them the most money, consumers have got to know that," Mr Sims said.

That may mean companies like Trivago will not get as many people clicking on their site.

"Well, so be it," Mr Sims said.

"We're really fed up with these comparison sites misleading consumers and consumers thinking they're getting a better deal than they in fact are."

Mr Sims said the ACCC had previously taken action against energy comparison websites and, following hotel booking sites, its focus would now extend to other industries.

"This is a widespread issue as people come to rely on sites to make their purchase choices," Mr Sims said.

"We will focus our activity on websites that have a lot of use, that consumers rely on. And we will take action when we think they are misleading."

Mr Sims the ACCC would also be closely monitoring whether Trivago changes its behaviour to start informing consumers if their rankings are based on advertising money, and to highlight that the price they are seeing is not necessarily the best price.

"That may prompt consumers to ring up the hotel they're thinking of going to," he said.

"I know its old-fashioned technology, but you may find … it's probably usually worth that phone call. Or visiting the hotel website itself if you don't like making phone calls."

A spokeswoman for Trivago said the company would closely review the ACCC's decision.

"The judgment received yesterday from the court provides new guidance on how results of comparator websites, like Trivago and others, should be displayed in Australia," she said.

"We are working to quickly understand the implications of this decision on our website design and its overall impact on the Australian travel industry."