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Meriton fined $3 million for breaches of Australian Consumer Law

Earlier this week the ACCC announced Meriton had been fined $3 million for misleading or deceptive conduct, relating to Meriton’s manipulation of TripAdvisor reviews of its serviced apartment properties.

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The Background

TripAdvisor offers a “Review Express” service to accommodation providers. The accommodation provider passes on email addresses of recent guests who have consented to their information being shared. TripAdvisor then emails the guests to request a review. TripAdvisor states that providers regularly using the service see an increase in reviews of 28 to 33 percent.

In November 2017, the Federal Court found that on several occasions between November 2014 and October 2015, Meriton Property Services Pty Ltd deliberately “masked” email addresses of guests they determined would be likely to give negative reviews. This was done by adding letters to email addresses of guests who had complained, so the guests would not receive the prompt from TripAdvisor. During periods when there were infrastructure issues such as no hot water or lifts not working, Meriton deliberately withheld the email addresses of most of the guests.

This conduct was part of Meriton’s standard operating procedure for check-out, which stated:

Ask guest if they enjoyed their stay, if positive pass a Trip advisor feedback card to guest requesting them to post feedback online and if negative mask guest email by adding MSA to the beginning of guest email address and discuss concerns.

Staff members would be disciplined if they did not correctly follow the procedure. The Court was critical of the conduct being a part of company policy, rather than simply the independent acts of ‘rogue’ employees abusing the Review Express system.

Misleading or deceptive conduct; conduct liable to mislead

Due to the offending conduct, the reviews of the Meriton properties were skewed towards more positive reviews. The rankings of the properties were artificially improved as a result, presenting a misleading picture to consumers. The ACCC Commissioner stated:

Many consumers base their purchasing decisions on reviews they get through sites like TripAdvisor. It’s therefore vital the reviews on these review sites are not manipulated and accurately reflect all customers’ opinions – the good and the bad.

The conduct was found to be in breach of sections 18 and 34 of the Australian Consumer Law (ACL).

The fine

The maximum penalty for a corporation for each act or omission giving rise to a breach of the ACL is $1.1 million. The ACCC pushed for a $20 million penalty, arguing thousands of individual breaches had occurred. Meriton argued that a penalty in the range of $330,000 to $440,000 was more appropriate in the circumstances and that the contravening practice amounted to only one breach. The Court found thirteen breaches of the ACL (one breach for each of the 13 Meriton properties.) The maximum penalty was found to be $14.3 million.

The Court had regard to several matters in determining the appropriate fine to be $3 million; these included the size of Meriton, the deliberateness of the conduct, the involvement of senior management, co-operation by Meriton and the fact that Meriton had no prior history of ACL breaches.

Compliance and Education/Training Program

In addition to the fine, Meriton was ordered to establish a Compliance and Education/Training Program to ensure its employees and officers understand the company’s obligations under the ACL and to prevent any further breach of the law. The program is to include the appointment of an appropriately skilled Compliance Officer and a Compliance Advisor, conduct of a risk assessment, the establishment of a compliance policy, a complaints handling system, whistle-blower protection, staff training, compliance reviews and reporting. The requirements are extensive and are likely to impose a significant additional financial burden on Meriton to comply with.

Key takeaways

In reaching its conclusion on the appropriate penalty, the Court stated:

As to general deterrence, a substantial penalty is required to make clear to corporations engaging with the internet and online sites that it is not acceptable to contravene the Australian Consumer Law. Because so many consumers use the internet and online sites to gather information about products and services, it is imperative that corporations engaging with the internet and online sites comply with the Australian Consumer Law.

We can expect the ACCC to continue to take these matters seriously and recommend that all businesses relying on third party review sites have appropriate policies and procedures in place to prevent any breach of the ACL. Regular staff training is also recommended.

Read the full judgment here.

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