Canada: Competition Bureau Cracks Down On FlightHub's Marketing Practices

On February 24, 2021, a consent agreement (the "Agreement") was registered with the Competition Tribunal. The Competition Bureau (the "Bureau") concluded that FlightHub Group Inc. ("FlightHub"), an online travel agency, charged customers hidden fees, authored positive customer reviews to promote its services, and made numerous false or misleading claims about several of its flight-booking services. FlightHub and its directors are now facing administrative monetary penalties totaling $5.8 million dollars.

FlightHub is an online-based travel company that provides users with access to airline and hotel offers. FlightHub operates two websites, FlightHub.com and JustFly.com, which allow consumers to search for flights, hotels and cruises while comparing prices among various providers.

The Bureau began a formal investigation of FlightHub's marketing practices back in November 2018. As part of its investigation, the Bureau reviewed thousands of consumer complaints and seized documents at the company's headquarters in Montreal. On October 28, 2019, the Bureau registered a "temporary consent agreement" with the Competition Tribunal to protect consumers from false or misleading representations related to hidden fees for flights offered on FlightHub.com and JustFly.com. This was the first temporary agreement ever obtained by the Bureau during an ongoing investigation.

The Bureau ultimately concluded that FlightHub made millions in revenue from charging hidden fees, and misled consumers on FlightHub.com and JustFly.com about the costs and terms associated with a range of services, including, among other things:

• promoting a secured seat selection service with various airlines at no extra cost when such seats were not secured and fees for this service were charged and actively concealed;
• promoting false or misleading pricing information on the websites and in emails, and in some circumstances increasing prices after consumers selected a flight;
• giving the impression that consumers had more extensive cancellation and rebooking rights than they were actually afforded; and
• giving the impression that consumers could cancel a flight in return for credit on any future flight, when the credit was subject to a number of restrictions or the credit's value was reduced.

The Agreement prohibits FlightHub and directors Matthew Keezer and Nicholas Hart from making any further false or misleading claims related to the above noted deceptive marketing practices. Also, before consumers confirm their order, FlightHub will be required to display all additional fees separate from non-optional fees without the consumer needing to hover over a certain link or click for more information. Moreover, FlightHub is required to remove any online reviews which appeared to be from customers but were posted by the company or its employees.

In addition to a $5 million penalty for FlightHub, two company directors have agreed to penalties of $400,000 each. The Bureau concluded that the directors knowingly published the misleading representations contrary to section 52 (1.2.) of the Competition Act. The Bureau also considered FlightHub's insolvency proceeding. It was granted creditor protection by the Quebec Superior Court back in May 2020. In light of this, the Bureau determined that it was in the public interest to resolve the matter by adding the directors to the Agreement.

As a result, 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, despite the outcome of the CCAA proceedings. Further, FlightHub agreed to include any new corporate entity as part of this Agreement should there be a transfer of assets resulting from the CCAA proceedings or otherwise.