Name your own price, then pay more: Court upholds Priceline’s model

Freeman v., Inc., 2013 WL 5946069, B242653 (Cal. Ct. App. Nov. 7, 2013)

The court of appeals upheld a ruling getting Priceline off the hook for promising one price and delivering another, because the terms and conditions said that could happen. 

Freeman booked a hotel room at a Trump property and was charged a resort fee.  He sued over that, and over the service fee paid to Priceline.  Priceline allows customers to make travel arrangements through its website; it can’t require a hotel to make a room available at any particular rate.  Priceline’s Name Your Own Price service allows consumers to get deeply discounted rooms.  A NYOP booking starts when a customer selects dates of stay, general location, and quality/star rating of hotel, and names the price she’s willing to pay.  The resulting “Contract Page” displays the details of the request, with an amount designated as “Total Charges” at the bottom.  This is the offered price multiplied by the number of nights/rooms, plus “Taxes and Service Fees.”  The “Total Charges” are charged to the customer’s credit card if a hotel accepts the requested price. 

Directly below “Total Charges” is a large, bold, blue “Important Information.”  Five bullet points follow, of which the fourth is: “The reservation holder must present a valid photo ID and credit card at check-in. The credit card is required for any additional hotel specific service fees or incidental charges or fees that may be charged by the hotel to the customer at checkout. These charges may be mandatory (e.g., resort fees) or optional (parking, phone calls or minibar charges) and are not included in your offer price.”  In that bullet point, “charges” links to a page that reiterates: “Depending on the property you stay at, you may also be charged (i) certain mandatory hotel specific service fees, for example, resort fees (which typically apply to resort type destinations and, if applicable, may range from $10 to $40 per day), energy surcharges, newspaper delivery fees, in-room safe fees, tourism fees, or housekeeping fees and/or (ii) certain optional incidental fees  …. Please contact the hotel directly as to whether and which charges and service fees apply.”  Also, “Taxes and Service Fees” on the Contract Page leads to the same page, which also says that the credit card charge includes “an estimated amount to recover the amount we pay to the hotel in connection with your reservation for taxes owed by the hotel … The balance of the charge for Taxes and Fees is a fee we retain as part of the compensation for our services ….”  It specifies that the fees can vary by hotel—meaning what the consumer gains on the swings can be lost on the roundabouts.

Consumers have to initial a box on the Contract Page next to “I have read, accept and agree to abide by’s terms and conditions and privacy policy.” “[T]erms and conditions” also links to a page setting forth the same information.

Freeman made a reservation, reading the terms and conditions.  He offered $89 per night; the Trump Hotel accepted this price (standard room rate was $109 for the first night and $119 for the second).  He was charged a $15/night resort fee plus occupancy tax.

Freeman argued that Priceline’s TV ads were deceptive because they didn’t disclose that the price offered through NYOP wouldn’t be the total price for the room, and that the resort fee/service fee information was misleadingly buried deep in the process.  The trial court held that Priceline and Trump made sufficient disclosure that some hotel fees may be mandatory, with resort fees as just one example.  “It would be impossible for Priceline to notify a customer at the time of signing on whether a hotel will require any mandatory fee, including a resort fee, because neither Priceline, nor the customer, would know if any hotel meets the customer’s parameters until after the credit information is entered on the page following the Contract Page.”  (Ed. note: of course, with these charges, the hotel may well not meet the customer’s parameters.  How come Priceline couldn’t program its algorithm to include in the price used to assess NYOP compatibility any fees that are mandatory for every guest?  Priceline could certainly require hotels to provide this information in order to participate.  A mandatory “fee” is part of the price.)

Also, the Contract Page specifically included an estimate for Taxes and Service Fees, which disclosed that Priceline could charge an additional service fee.  These disclosures were clear and conspicuous as a matter of law, so there could be no deceptive omission.  The failure to disclose in the TV ads was immaterial given that “a Priceline customer would necessarily receive the multiple disclosures contained on Priceline’s Web site before making a reservation.” The TV ads, “each of which display scenarios that include elements of fantasy[,] contain limited information about Priceline’s services and in no way enable a customer to bypass or otherwise avoid the multiple disclosures on Priceline’s Web site.”  Also, the hyperlinks here conveyed adequate and unambiguous notice.  (This seems like a good candidate for regulatory action.  It may have been “unambiguous” that random fees could apply, but those fees could make the price promises illusory.)

Freeman argued that deceptiveness was a question of fact, but there was no triable issue here.

Nor was there unconscionability.  The disclosures were clear and conspicuous, and there was nothing substantively unconscionable.  Freeman could have avoided the problem by reserving a hotel room some other way, and nothing here shocked the conscience.

The same arguments that defeated the CLRA claim also doomed the UCL claim.  There was nothing unfair, judged by the standard: “(1) The consumer injury must be substantial; (2) the injury must not be outweighed by any countervailing benefits to consumers or competition; and (3) it must be an injury that consumers themselves could not reasonably have avoided.”  Freeman could have avoided his injury because of the conspicuous disclosure and other alternate means to book a hotel room with some hotel that didn’t charge a resort fee.
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