How the Australian Consumer Law became a trip hazard for Meriton Serviced Apartments

“The important thing”, said Albert Einstein, “is not to stop questioning”.  Which is all very well for Einstein, but he wasn’t running a serviced apartment property at the time.

When choosing accommodation in hotels and serviced apartments, consumers are increasingly reliant on reviews provided by websites such as TripAdvisor.  To collect as many reviews as possible, TripAdvisor has a service called “Review Express”, which sends  emails to guests based on the email addresses provided to TripAdvisor by the accommodation provider.  However, you don’t have to be Einstein to understand that guests who have made complaints during their stay at the property might not give the most glowing reviews.

So, can you stop TripAdvisor questioning the guests who have made complaints in order to improve your reviews?  Well, no.  Quite apart from the fact that TripAdvisor considers such conduct to be fraudulent, it is likely that if you do so (as the Federal Court explained this week) you will breach the Australian Consumer Law.

The issue arose when the Court was considering a case brought by the ACCC against Meriton Property Services Pty Ltd (Meriton) alleging that Meriton had engaged in misleading and deceptive conduct. The ACCC alleged (and Meriton broadly agreed) that Meriton had sought to “game” the “Review Express” process using two different practices.

The first practice involved what the Court referred to as “MSA masking”.  If a guest made a complaint during their stay, the letters MSA would be added to the start of the guest’s email address which was provided to TripAdvisor. This meant that rather than the email going to (for example, “angus@domain name”, TripAdvisor’s email would be sent to “MSAangus@domain name”, so that the email requesting a review would never reach the guest.  The evidence showed that between 1 April 2015 and 31 December 2015, there were 14,584 examples of “MSA masking” at Meriton’s various properties around Australia.

The second practice involved what the Court referred to as “bulk withholding”.  If there was a service disruption at one of Meriton’s properties (such as lift breakdown or lack of hot water), Meriton would withhold all of the email addresses of guests who had stayed at the property during the period of the disruption from TripAdvisor. The evidence showed that such withholdings occurred about once a week during the relevant period.

The evidence showed that both practices were widespread (in particular, the Court referred the “vast scale” of the MSA masking practice).  Further, it was clear that this was not the work of a few rogue employees; the Court referred to an email from the manager of one of Meriton’s properties which stated that “Staff have been advised that if they fail to [MSA mask] a booking when they should have it will result in a warning”.  (It is obviously less than optimal to issue warnings to employees who fail to engage in misleading and deceptive conduct).

Meriton’s practices were in breach of TripAdvisor’s rules, and Meriton agreed during the hearing that it should not have engaged in the practices.  However, Meriton denied that it had engaged in misleading and deceptive conduct.  For example, Meriton sought to argue that its conduct was not misleading and deceptive because the ratings on TripAdvisor were not dissimilar to the ratings on (where there was no suggestion of manipulation of the rating system).

The Court disagreed. In particular, although the Court found that the practices may not have had a significant effect on the rating of the Meriton properties, the position was different in relation to ranking (that is, relative to other properties in the same area). Meriton’s conduct was found to be misleading and deceptive because “the positive impression of the Meriton serviced apartments on the TripAdvisor website was incomplete and inaccurate, or unduly favourable”.  Further, the Court found that consumers using TripAdvisor would be likely to assume that the reviews had not been solicited in a selective way.  These findings demonstrate that the question of what is misleading and deceptive will be approached in a practical, rather than a technical, way.  It follows that in cases of this kind, “technical defences” will often not be worth a great deal.

This is not the first case in which the ACCC has taken action in relation to misleading online reviews and testimonials. In 2015, a franchisor of a carpet cleaning business was fined $215,000 after the Federal Court found that it had encouraged franchisees to post fabricated testimonials on various websites.  As the Meriton case makes clear, the ACCC is increasingly targeting misleading and deceptive conduct online (and, of course, claims for misleading and deceptive conduct can be made against you by your competitors, as well as by the ACCC).

So, the lesson of the story is that if your business relies upon online reviews or testimonials (either on stand-alone sites such as TripAdvisor, or on the pages of social media sites such as Facebook) you need to have a consumer law compliance strategy in place.  That strategy needs to align with your other business processes and needs to identify the particular people within the organisation who need to understand the sources of legal risk.

Equally, it is important to understand the terms of service for all relevant websites with which your business interacts, and to ensure that compliance with those terms extends further than simply clicking the “I Accept” button when you first sign up.  In the Meriton case, the fact that Meriton’s practices were in breach of TripAdvisor’s rules made it more difficult for Meriton to defend its conduct as being within the bounds of the Australian Consumer Law.

Of course, compliance strategies cannot afford to be static – which bring us back to Einstein again, and to the need to keep questioning your compliance strategy to ensure that the carefully prepared policy is actually being applied on the ground.  That’s the important thing if you want to ensure that you don’t receive a review from the ACCC, or from the Federal Court, of zero stars.

For more on our competition and consumer law capabilities, contact Dennis Vuaran or Philip Stevens or Angus Macinnis or Grace Hur

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November 10
Competition and consumer law