The online travel service Hotwire is the subject of a potential class action that includes claims for false advertising and unfair competition. A California based federal court recently dismissed Hotwire’s motion to dismiss the complaint. The issue is Hotwire’s use of the term “estimate" in its contracts with consumers.
The plaintiff in the case, Daniel Shahar, arranged to rent a car at the Ben Gurion Airport in Tel Aviv through Hotwire’s Web site. Hotwire provided an estimated trip total of $70. But when Shahar picked up the car, he got a bill for $150.91 – the $70 Hotwire quoted plus $60 in mandatory third party insurance and $20.82 in taxes. In other words, Hotwire’s estimate was off by over 100%.
Hotwire moved to dismiss the complaint on the “what part of estimate do you not understand” theory. In other words, it’s not deceptive to be wrong, especially when a word like estimate suggests imprecision.
But Hotwire’s argument may have been too simple. Shahar alleged that Hotwire knew the industry well enough to know that there would be charges in addition to the base rate. But by estimating just the base rate, Hotwire essentially said the $70 was its best guess, meaning that it “estimated” any additional costs would be $0. And according to Shahar, Hotwire had to know better.
The court agreed that Shahar made an allegation sufficient to avoid immediate dismissal of the complaint. The suit is just beginning and the ruling doesn’t mean Hotwire lost. But it does mean Shahar (and maybe thousands of others if the court grants class action status) can engage in discovery to see what Hotwire knew and when it knew it.
The lesson? If you’re offering goods or services online, it always makes sense to be transparent.