Expedia Settles False Advertising Class Action With Hotels

The company will pay $2.1 million in legal fees and adopt safeguards to make sure certain hotels are no longer listed as “sold out” or “unavailable” on its websites.

Expedia and its affiliaties will ensure certain hotels are no longer listed as “sold out” or “unavailable” on its websites under the terms of a class action settlement. (AP Photo/Elaine Thompson, File)

SAN FRANCISCO (CN) — Travel booking giant Expedia and its affiliates will take steps to ensure non-partnering hotels are no longer falsely advertised as “sold out” on its platforms under the terms of a class action settlement approved Friday.

U.S. District Judge Vince Chhabria approved the deal nearly five years after two California hotels sued the online booking company in August 2016. Buckeye Tree Lodge and Sequoia Village Inn claim Expedia used deceptive online ads to target consumers who searched for hotels that could not be booked through Expedia. Consumers were allegedly directed to webpages that listed fake phone numbers for non-partnering hotels and falsely labeled them as unavailable for sold out.

The plaintiffs claim Expedia intended to siphon business away from non-partnering hotels to lodges and inns that pay the company fees for its online booking services. Expedia said the practice resulted from “inadvertent technical errors” that have since been corrected.

In 2019, Chhabria certified a class of hotels to seek injunctive relief but no monetary damages. The class includes all hotels that appear on Expedia’s websites even though they are not capable of being booked on those sites.

Last year, Chhabira denied Expedia’s motion for summary judgment and found the company would have to face a bench trial on claims that it violated false advertising prohibitions under the Lanham Act.

Chhabria found that while some advertising messages such as “We are sold out” were “literally false,” other messages were “not literally false” but potentially misleading. For example, one Expedia ad for nonparticipating hotels read: “Your dates are popular! Rooms are unavailable for your trip dates on Expedia. Try new dates to check availability.” The message suggested that Expedia could book rooms for that hotel if different reservation dates were chosen, even though it could not, Chhabria concluded.

In February, both sides proposed a settlement in which Expedia will commit to a series of measures to ensure nonparticipating hotels are no longer listed on its platforms.

To accomplish that goal, Expedia will contractually require third-party booking companies that it works with to notify Expedia when a hotel terminates its relationship with that third party. It will also use technological controls to prevent nonparticipating hotels from appearing in its search engine results when it learns those hotels no longer work with its third-party booking partners. Additionally, the company also vowed to “act promptly” to remove nonparticipating hotels from its websites if it learns a hotel is being falsely advertised as unavailable. The terms of an injunction imposed by the settlement will expire after three years.

“The settlement provides significant benefits to the Class and to the general public, as travelers will no longer be misled as to the availability of class member hotels that are not bookable on Expedia’s websites,” attorneys for the plaintiff class wrote in a Feb. 24 motion for settlement approval.

Chhabria granted a request for $2.1 million in attorneys’ fees and costs for the plaintiff class lawyers. He also granted incentive awards of $12,500 to each named plaintiff.

Lawyers for both sides did not immediately respond to requests for comment Friday.

The plaintiff class is represented by James Patterson and Jennifer French of the Patterson Law Group in San Diego.

Attorney Cortlin Lannin of Covington & Burling in San Francisco represents Expedia.

First founded by Microsoft in 1996, Expedia spun off as a separate company in 1999 during the height of the dot-com boom. Today, Expedia owns multiple online booking platforms, including Vrbo, Hotels.com, Hotwire.com, Orbitz, Travelocity, Trivago and CarRentals.com. Expedia earned $12 billion in revenue in 2019 but saw its revenue dwindle to $5.2 billion in 2020 due to the Covid-19 pandemic. The company is valued at $25 billion.

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