CANADIAN COMPETITION BUREAU GROUNDS FLIGHTHUB WITH $5.8 MILLION FINE (Article)
By Gavin Murphy
(with the collaboration of Marianne Chow and Alice Mount)
Following a formal investigation by the Canadian Competition Bureau, FlightHub (an aviation e-commerce platform) and two of its directors were fined $5.8 million after registration of a consent agreement with the Competition Tribunal in February 2021. The case confirms a no tolerance policy for deceptive online marketing practices with particular reference to drip pricing.
Canada’s Competition Bureau (‘Bureau’), which assists the Commissioner of Competition (‘Commissioner’) in the administration and enforcement of the Competition Act (‘Act’), announced on 24 February 2021 that the Commissioner had clipped the wings of Montreal-based FlightHub Group Inc. (‘FlightHub’). FlightHub, which operates FlightHub.com and JustFly.com, had a $5.8 million administrative monetary penalty levied against it and two directors for drip pricing.  The Commissioner determined that Flighthub mislead consumers about prices and services, making millions of dollars in revenue from hidden fees and posting false online reviews. As well as a $5 million sanction against FlightHub, both directors agreed to penalties of $400,000 each after the ‘online travel agency charged customers hidden fees, authored positive customer reviews to promote its services, and made numerous false or misleading claims about its prices and other flight-booking services’.(FlightHub was declared insolvent and granted creditor protection by the Quebec Superior Court in May 2020, thereby fundamentally altering its ability to pay the penalties.)
The Bureau initiated a formal investigation into FlightHub’s marketing practices in November 2018 after receiving countless complaints concerning the marketing practices of FlightHub.com and JustFly.com. Complaints referred to the application of hidden fees for services such as seat selection and flight cancellation and rebooking, resulting in additional charges and higher prices. In February 2019 the Bureau executed search warrants at FlightHub’s headquarters and seized relevant documents to assist in its investigation.
In October 2019 the Commissioner entered into a temporary consent agreement with FlightHub to prohibit it from using false or misleading representations on FlightHub.com and JustFly.com while the investigation continued. This was the first ever use of a temporary consent agreement under the Act during an ongoing investigation. The temporary consent agreement is designed to avoid litigation but has the same legal effect as an interim injunction.
The Bureau claims the ‘settlement [final consent agreement], which resolves all of the Bureau’s concerns, is designed to ensure that all prices, fees and terms associated with FlightHub’s services are clearly disclosed to consumers’.
More specifically, the temporary consent agreement is replaced with a final consent agreement registered with the Competition Tribunal (‘Tribunal’). Once registered, the consent agreement has the same force and effect as an order of the Tribunal.
Final consent agreement
After a remarkably long series of ‘whereas’ clauses, the consent agreement provides an overarching clause at Part II paragraph 1 that FlightHub and the two named directors (‘the Respondents’) will comply with Part VII.I of the Act. Paragraph 3(a) gets to specifics and says that the Respondents:
- shall not make, or permit to be made, any representation to the public that conveys the materially false or misleading general impression that consumers can select a seat or seat-type, or indicate that they do not wish to select a seat or seat type, without paying an Additional Fee;
- shall not make, or permit to be made, any representation to the public that conveys the materially false or misleading general impression that consumers can obtain cancellation and/or rebooking rights without paying an Additional Fee;
iii. shall not make, or permit to be made, any representation to the public that conveys the materially false or misleading general impression that consumers are not paying certain Additional Fees by concealing them and bundling them with other non-optional fees;
- shall disclose any Additional Fees and their amounts in such a way that a consumer will see the fee prior to selecting any Flight-Related Services; and
- shall prominently disclose all Additional Fees individually in a purchase summary in a manner that is separate from non-optional fees, before consumers are invited to confirm their order. For greater certainty, consumers should not need to take some additional step, such as hovering or clicking, to see the Additional Fees.
The consent agreement further says that the Respondents shall not make a representation to the public that conveys the general impression that a consumer can obtain a reservation at the price represented, taxes and fees included, if a consumer is then subsequently charged additional fees. As well, the Respondents shall not state:
- Consumers can reserve their seats or that their seats will be secured by FlightHub where that is not the case;
- The cancellation and/or rebooking rights offered by FlightHub provide consumers with cancellation and/or rebooking rights that are for a longer time period or have fewer restrictions than is actually the case;
iii. Flight exchanges are credits, or that a flight exchange has greater value, greater choice, or fewer restrictions or costs than is actually the case; and
- Consumers can cancel a Flight and subsequently apply the value of that Flight against future purchases of Flights on the Websites, when in fact the applicable value is subsequently reduced.
The Respondents shall also refrain from making any representation to the public that conveys the misleading general impression that reviews on third-party websites are posted by independent and impartial consumers, removing any and all reviews posted by or on their behalf. Additionally, within 90 days of the registration of the consent agreement, FlightHub shall establish and maintain a corporate compliance program to promote compliance with the Act in general, as well as Part VII.1 of the Act and the terms of the consent agreement in particular. Finally, the consent agreement binds the Respondents for a term of 10 years following registration.
The FlightHub settlement sends an emphatic message that drip pricing will not be tolerated in the Canadian economy. Furthermore, company directors are also at risk should they engage in this behaviour as the Commissioner took the unusual step in this case to have them penalised. Drip pricing is a relatively recent phenomenon of online retailers and inherently misleading and anticompetitive. But given FlightHub’s uncertain corporate status, this settlement may be merely a pyrrhic victory for the Commissioner. Time will tell.
The final word goes to the Commissioner. He said:
We have pursued this case relentlessly to ensure that Canadians would be protected against any further deceptive marketing by FlightHub and its directors. Cracking down on deceptive marketing in the online marketplace is one of the Bureau’s top priorities, and we’ll continue to do everything in our power to stop it.
 Competition Act, RSC 1985, c. C-34, as amended.
 Competition Bureau, “Investigation of FlightHub ends with $5.8M in total penalties for company and directors,” 24 February 2021, available at: https://www.canada.ca/en/competition-bureau/news/2021/02/investigation-of-flighthub-ends-with-58m-in-total-penalties-for-company-and-directors.html [accessed 26 March 2021].
 According to its website, “FlightHub is Canada's fastest growing online travel company. With a dedicated team with over 20 years experience of serving Canada's travel needs offline, we decided to take our expertise to the web and develop amazing software to improve every aspect of the travel process. We are a well skilled team of software engineers and travel specialists that work tirelessly to make FlightHub one of the best sites to plan, book, and manage your travel plans”, available at: https://www.flighthub.com/about-us [accessed 26 March 2021].
 “Penalizing FlightHub’s directors is a noteworthy move on the Bureau’s part. Although fines against individuals are typical when enforcing the Competition Act’s criminal provisions, obtaining them in respect of civil misrepresentation cases has not been the norm in recent years. While FlightHub’s particularly precarious financial situation might have also contributed to the decision to go after individual directors – FlightHub was granted creditor protection last year, and as such, the monetary penalties here will likely get lumped into a long line of unsecured creditor claims – the individual penalties serve as a reminder to directors of their obligation to ensure their companies abide by the Competition Act”, Competition/Antitrust & Foreign Investment Group, “FlightHub and its Directors caught in the Competition Bureau’s wave of “drip pricing” enforcement: agree to $5.8M in penalties,” 25 February 2021, mccarthy tetrault, available at: https://www.mccarthy.ca/en/insights/articles/flighthub-and-its-directors-caught-competition-bureaus-wave-drip-pricing-enforcement-agree-58m-penalties [accessed 26 March 2021].
 Drip pricing is an online retail technique whereby the initial price advertised at the beginning of the purchase process is followed by additional fees, taxes or charges which are incrementally applied or "dripped".
The Act’s deceptive marketing practices provisions forbid businesses from making false or misleading representations to the public about products or services. See Part VII.1 of the Act, available at: https://laws.justice.gc.ca/eng/acts/C-34/page-17.html#h-89169 [accessed 26 March 2021].
 “Even though this case has no precedential value since it was not a disputed matter, it still serves as a reminder that the Competition Bureau remains focused on conduct it believes to be deceptive, including drip pricing. It is also significant that the focus here is online advertising and the travel industry, where many consumer protection organizations internationally have focused particularly due to [the] COVID-19 pandemic,” William Wu, Éric Vallières, Joshua Krane and James B. Musgrove, “Competition Bureau Grounds FlightHub’s Misleading Advertising,” Competition Law Bulletin, 3 March 2021, mcmillan; available at: https://mcmillan.ca/insights/competition-bureau-grounds-flighthubs-misleading-advertising/ [accessed 26 March 2021].
 But see Part III, paragraph 13 of the consent agreement. For further details on the insolvency process also see “CCAA Records
Flighthub Group Inc., Flighthub Service Inc., SSFP Corp., Justfly Inc., Justfly Corp. and 11644670 Canada Inc”, 12 May 2020, available at https://www.ic.gc.ca/eic/site/bsf-osb.nsf/eng/br04300.html [accessed 26 March 2021].
 Consumer complaints about FlightHub’s marketing practices are also common in the USA. See in this regard, Gavin Murphy, “The Canadian Competition Bureau takes steps against misleading representations in online sales of airline tickets (FlightHub)”, e-competitions, 28 October 2019, available at: https://www.concurrences.com/en/bulletin/news-issues/october-2019/the-canadian-competition-bureau-takes-steps-against-misleading-representations [accessed 26 March 2021].
 Competition Bureau, “Investigation of FlightHub ends with $5.8M in total penalties for company and directors”, at fn 2.
 THE COMMISSIONER OF COMPETITION and FLIGHTHUB GROUP INC. / GROUPE FLIGHTHUB INC., MATTHEW KEEZER and NICHOLAS HART, Competition Tribunal, File number CT-2019-003, available at: https://decisions.ct-tc.gc.ca/ct-tc/cdo/en/item/493395/index.do [accessed 26 March 2021].
 According to its website, “The Competition Tribunal has jurisdiction to hear and dispose of all applications made under parts VII.1 and VIII of the Competition Act and any related matters. It also hears references filed pursuant to section 124.2 of the Competition Act.” For further details see https://www.ct-tc.gc.ca/en/home.html [accessed 26 March 2021].
 This section of the consent agreement is titled “COMPLIANCE WITH THE DECEPTIVE MARKETING PRACTICES PROVISIONS OF THE ACT”.
 THE COMMISSIONER OF COMPETITION and FLIGHTHUB GROUP INC. / GROUPE FLIGHTHUB INC., MATTHEW KEEZER and NICHOLAS HART, at fn 12.
 Ibid at Part II, paragraph 5(a).
“In reaching today’s settlement, the Bureau took into account that FlightHub is insolvent and was granted creditor protection by the Quebec Superior Court in May 2020. The associated penalties will be treated as unsecured claims in any plan of arrangement to be filed by FlightHub under the Companies’ Creditors Arrangement Act (CCAA). All other terms of the settlement are binding on FlightHub and the two directors for a period of 10 years, regardless of the outcome of the CCAA proceedings.” Competition Bureau, “Investigation of FlightHub ends with $5.8M in total penalties for company and directors”, at fn 2.
 Any successor company would also be bound by the terms and conditions of the consent agreement. See Part IV “CCAA Process” of the consent agreement.
 Competition Bureau, “Investigation of FlightHub ends with $5.8M in total penalties for company and directors”, at fn 2.