Australia: No merit in Meritons conduct: Federal Court finds serviced apartment operator misled consumers on Tripadvisor

NO MERIT IN MERITONS CONDUCT: FEDERAL COURT FINDS SERVICED APARTMENT OPERATOR MISLED CONSUMERS ON TRIPADVISOR

The Federal Court has found that a serviced apartment operator's efforts to prevent its guests from posting negative online reviews on TripAdvisor was likely to mislead or deceive in contravention of the Australian Consumer Law.

BACKGROUND

Consumer sentiment towards a brand was once shaped by the deliberate messaging received through traditional forms of advertising in billboards, glossy brochures and television advertisements. Back then, consumers had limited access to alternative sources of information about the products and services marketed to them. Now, of course, consumer perceptions are heavily influenced by a globally connected online community, sharing information and their experiences through electronic word of mouth.

In the digital age, word travels fast. The scale, speed and real-time nature of social media make it easier for people to share and express their views about the products and services offered by businesses. Online platforms have been created for consumers to post reviews about their experiences and algorithms have been developed to rank businesses based on customer reviews. Consumers have come to rely on online reviews to inform their purchasing decisions. Positive reviews lead to more business and increased revenue; negative reviews damage brand and reputation, undoing carefully planned and expensive marketing campaigns.

Many businesses have creatively engaged with new media to legitimately join in the online conversation about their brand. However, businesses that try to manipulate online reviews to improve their rankings and avoid negative reviews do so at their peril.

In this context, the judgment delivered on 10 November 2017 in ACCC v Meriton Property Services Pty Ltd¹ is timely and significant. It is the first case to consider conduct directed at selectively inviting consumers to post reviews on a third party website to create a more favourable or positive impression of the quality of services. In finding that this conduct contravened the ACL, the Court has sent a clear message that conduct which undermines the integrity of third party review platforms in order to mislead or deceive consumers is unlawful.

FACTS

Meriton provides serviced apartment accommodation at properties across Queensland and New South Wales. These properties are promoted on the popular online travel review site, TripAdvisor.

Consumers can post reviews of the Meriton serviced apartments on the TripAdvisor website via a TripAdvisor or Facebook account. In addition, as set out below, guests of the Meriton serviced apartments may have been invited by email to leave a review.

This is because from August 2013, Meriton participated in the 'Review Express' service offered by TripAdvisor. This service required Meriton to provide TripAdvisor with the email addresses of all guests who had stayed at its properties on a weekly basis. TripAdvisor (via the Review Express service) then sent email invitations to Meriton's guests to post a review on its website. The evidence established that using TripAdvisor's Review Express service substantially increases the number of reviews about a property.

At trial the Court heard that from November 2014 to October 2015, Meriton implemented a deliberate and systematic policy of preventing guests who had complained of, or experienced poor service, from receiving an invitation to post a review.

The Court found that Meriton did this by two methods:

• where guests had made a complaint or Meriton's staff otherwise considered that guests had a negative experience at a Meriton property, Meriton instructed its frontline staff to add the letters 'MSA' to the guests' email addresses before it provided them to TripAdvisor. This "masked" the email addresses, rendering them invalid and causing TripAdvisor's invitations to them to 'bounce' (Masking Practice); and
• where a Meriton property experienced a major service disruption such as a lift or hot water outage, Meriton instructed its staff to withhold from TripAdvisor the email addresses of all guests who had stayed during that period. This meant that those guests did not receive an invitation from TripAdvisor to review Meriton's serviced apartment (Bulk Withholding Practice).

The conduct was contrary to TripAdvisor's guidelines for using Review Express which stated that selectively emailing guests who are most likely to write positive reviews was considered to be a fraudulent practice.

EFFECT OF THE CONDUCT

The Court found that the conduct had the following effects on consumers searching for accommodation on TripAdvisor:

• in the case of the Masking Practice, Meriton's conduct served to reduce the number of negative reviews left by consumers regarding a range of complaints about the Meriton properties. Because of this, Meriton created an unduly favourable impression about the quality and amenity of Meriton's serviced apartments; and
• in the case of the Bulk Withholding Practice, Meriton's conduct served to reduce the number of negative reviews posted about major service disruptions at Meriton's properties. This conduct had the effect of reducing, in the mind of consumers, awareness of the prevalence of service disruptions at the Meriton properties, which created an impression that was incomplete and inaccurate.

The Court also found that Meriton's conduct affected the ranking of Meriton's properties in some cases, which created an unduly favourable impression of the guest feedback about the serviced apartment.

CONTRAVENTIONS OF THE ACL

The Court found that by engaging in the Practices, Meriton engaged in conduct that was likely to mislead or deceive within the meaning of s 18 of the Australian Consumer Law (ACL).

The Court also found that Meriton's conduct was liable to mislead the public as to the characteristics and suitability for their purposes of the accommodation services provided by Meriton at the properties, in contravention of s 34 of the ACL.

KEY LESSONS

Although many cases under ss 18 and 34 of the ACL involve the making of a misleading statement, these provisions are framed in terms of conduct rather than the making of a representation. The Meriton case demonstrates the flexibility of these provisions and their application to new media. This case concerned Meriton's guests posting online reviews and TripAdvisor publishing them. However, Meriton's conduct in interfering with guest reviews made it liable under the ACL.

Finally, with the increasing availability of online reviews and the growing influence they have on consumer purchasing decisions, it may be tempting for businesses to interfere with online consumer reviews of their services. This decision makes clear that businesses should not interfere with the integrity of third party review platforms to ensure that review sites reflect the full range of consumer opinions.

Corrs acts for the ACCC in this proceeding, which will now move to consider appropriate relief, including pecuniary penalties.

footnotes

¹ [2017] FCA 1305

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