After successfully taking on one of the world’s largest banks and Australia’s second largest airline, your correspondent suffered a maiden defeat in the Victorian Civil and Administrative Tribunal at the hands of American internet giant Expedia. The victory for Expedia may, however, be a pyrrhic one — as the true legal nature of its operations should sound a crucial warning for Australians seeking to book a flight or holiday using the website Expedia.com.au.
Expedia was originally formed by Microsoft in 1996 before being sold to TicketMaster at the height of the dot.com boom. TicketMaster was then acquired by US-entertainment billionaire Barry Diller (Diller was a senior executive at Paramount Pictures during the 1970s and 1980s before virtually creating the Fox TV network). Diller had earlier leveraged his purchase of the Home Shopping Network to acquire IAC/Interactive (which would then acquire TicketMaster). Expedia itself was spun-off from IAC/Interactive in 2005 but Diller remains the company’s executive chairman.
Expedia has been by far the most successful online based travel agent globally, owning not only the ubiquitous Expedia brand, but also Hotels.com. TripAdvisor and Classic Vacations.
But back to the case at hand. Earlier last year, your correspondent booked a ski holiday in the United States and for part of the booking, used Expedia’s hotel booking service. The booking was made using the www.expedia.com.au website and the writer had direct phone contact with Expedia’s Australian employees. It appeared to all intents and purposes that Expedia.com.au was an Australian company (and part of Expedia’s international business).
In 1999, Expedia had set up an Australian subsidiary, known as Expedia Australia Pty Ltd. Expedia Australia registered the domain name www.expedia.com.au. This was not an accident. In most instances, companies or individuals are not permitted to purchase a .au domain name unless they are an Australian company, have an Australian business name, are an Australian partnership or fall under another limited category. The reason for this was explained by Australia’s domain name registry, Melbourne IT on its website:
“Australians are more comfortable dealing with a local company and this is particularly important if you want to sell online. Getting an .au domain name lets your customers know you’re a legitimate Australian business.”
The requirement is a valid one. If you are making a purchase on the internet, there are sometimes greater risks attaching to the purchaser than if they are buying a product or service from a business with a shop-front. Australian Domain Name authorities recognise this and demand that only Australian-based companies are permitted to register .au domain names. If something later goes wrong with the purchase, the consumer can rest assured that they can take legal action against an Australian-based company. For example, making a purchase on Expedia.com.au appears different to making a purchase on say, Amazon.com, in which the user knows they are dealing with an American-based company and would have minimal recourse.
Given all that, consumers would expect to think they are safe using Expedia’s Australian-based website, especially given it has a .au domain name, which means it is an Australian company? Wrong.
Despite appearances, Expedia Australia is merely a shelf holding company for Expedia Inc — its main purpose appears to be to confuse Australians into believing that they are dealing with an Australian company (Expedia argued that Expedia Australia provides “back office services”, but were unable to describe the actual nature of those services). While Expedia’s fine print notes that “Expedia.com.au is operated by US-based Expedia, Inc. While, Expedia, Inc is not currently eligible for a travel agent’s licence in Australia or to participate in the Travel Compensation Fund, our services are backed by the resources of the world’s largest online travel company”, that warning is located way down the bottom of the page, in small grey type.
Your correspondent sought to bring an action against Expedia Australia Pty Ltd (owner of the Expedia website, and the only Australian entity associated with Expedia) due to an alleged error that occurred when processing a change to travel plans. However, Expedia Australia (which is the sole owner of the www.Expedia.com.au domain name) sought to have the proceedings struck out, on the basis that the correct respondent in the matter was its US-parent company, Expedia Inc.
Ultimately, the Victorian Civil and Administrative Tribunal agreed with the arguments by Expedia’s high-priced external legal counsel that Expedia Inc was the correct respondent in this matter, regardless of the fact that the website is registered and owned by the Australian company. (Once that occurred, the case was effectively over before it begun, because a tribunal matter cannot be brought against a non-Australian respondent due to service requirements, regardless of the merits of the argument).
Perhaps most interestingly was the strenuous defence put forward by Expedia Australia — spending what appeared to be upwards of $5,000 to defend an action worth a fraction of that amount.
But perhaps Expedia Australia was not concerned about the specific matter, but rather, that its culpability to Australian consumers may be exposed. However, the US-based company with revenues last year exceeding $US2.5 billion need not be concerned — anyone booking a flight or hotel using Expedia.com.au has absolutely no recourse should something go wrong. Even if the problem is entirely the fault of Expedia, the consumer will have no recourse to Expedia Australia, even if they booked the service using Expedia’s Australian website.
So next time you are thinking about making a travel booking on Expedia.com.au, remember who you’re dealing with.