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False-Advertising Claims Against Expedia Headed to Trial

Expedia must face a bench trial on claims that it falsely advertised certain hotels as “sold out” to drum up business for inns and guesthouses that pay for its online booking services, a federal judge ruled Wednesday.

SAN FRANCISCO (CN) — Expedia must face a bench trial on claims that it falsely advertised certain hotels as “sold out” to drum up business for inns and guesthouses that pay for its online booking services, a federal judge ruled Wednesday.

“There are genuine disputes of fact regarding whether Expedia’s conduct violated the false advertising prohibitions of the Lanham Act,” U.S. District Judge Vince Chhabria wrote in a 6-page ruling.

Buckeye Tree Lodge and Sequoia Village Inn sued Expedia and its affiliated travel websites in August 2016, claiming the online booking giant targeted consumers who searched for hotels it could not book with deceptive ads on Google, Twitter and Facebook. Expedia was accused of listing fake phone numbers for those hotels and falsely labeling them as booked up, a practice the company says was the result of “technical errors” that have since been corrected.

Last year, Chhabira certified a nationwide class of hotels seeking damages for Expedia’s allegedly deceptive business practices.

Both Expedia and the plaintiffs sought summary judgment in the case, which could have allowed either side to prevail without a trial.

Chhabria found that while some advertising messages such as “We are sold out” were “literally false,” other messages were “not literally false but nonetheless may be misleading.”

For instance, one online ad that Expedia displayed for nonparticipating hotels read: “Your dates are popular! Rooms are unavailable for your trip dates on Expedia. Try new dates to check availability.”

While the rooms were unavailable through Expedia, the message appears to suggest that Expedia can otherwise book rooms for that hotel through its website, even though it could not.

The plaintiffs submitted a survey showing consumers were likely to be misled by those messages, but Expedia argued the survey was unreliable and asked “closed-end, leading, confusing questions.”

“Expedia raises fair concerns about the reliability and probative value of the plaintiffs’ survey evidence, and the question of whether these phrases were misleading cannot be answered at summary judgment,” Chhabria wrote.

But he rejected Expedia’s argument that the plaintiffs cannot seek injunctive relief because it stopped advertising allegedly misleading messages about nonparticipating hotels, a practice that it said resulted from “inadvertent technical errors.”

The company said it conducted investigations into the problem and imposed contractual obligations on its business partners to ensure the “errors” would not reoccur.

Chhabria found assertions of changed business practices were not good enough to prevent a claim for injunctive relief from going forward.

“Expedia portrays these reforms as business decisions, while failing to show that there is anything to keep it from reversing these decisions if business considerations change,” Chhabria wrote.

However, the judge granted Expedia’s motion for summary judgment on claims related to displaying fake phone numbers for hotels. He said the plaintiffs failed to present evidence that the phone numbers were “false, misleading or material to consumers’ purchasing decisions.”

The judge also denied Expedia’s motion to exclude the expert of opinion of Dr. Michael Dennis, a forensic consumer survey expert who conducted a study on whether consumers were likely to be misled by Expedia’s advertising messages. Expedia will have the chance to rebut that testimony at trial.

Chhabria scheduled a case management conference for Oct. 6 in San Francisco.

Attorneys for the plaintiff class and Expedia did not immediately return emails seeking comment Wednesday morning.

James Patterson of the San Diego firm Patterson Law Group represents the plaintiffs.

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

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