FlightHub and its Directors caught in the Competition Bureau’s wave of “drip pricing” enforcement: agree to $5.8M in penalties
On February 24, 2021, the Competition Bureau (“Bureau”) announced that it had entered into a consent agreement with FlightHub and two of its directors over allegations that the online travel booking company misled consumers about prices and services, made millions in revenue from hidden fees, and posted false online reviews about its services. As part of the settlement, FlightHub agreed to pay a $5 million administrative monetary penalty (“AMP”) and the two FlightHub directors are also liable for AMPs of $400,000 each. The settlement is a clear warning to directors that they, too, can be held accountable for deceptive conduct.
This case is a continuation of the Bureau’s increasingly aggressive enforcement activity in the digital marketplace – including its recent $9 million AMP against Facebook in 2020 – and is yet another in the line of recent “drip pricing” cases, including settlements with StubHub in 2020 ($1.3 million AMP), Live Nation / Ticketmaster in 2019 ($4.5 million AMP), and various car rental companies between 2015-2018 ($700,000 - $3 million AMPs).
“Drip pricing”, which is the practice of offering unattainable headline prices and then adding unavoidable mandatory fees later in the purchasing process, has been a major focus for the Bureau, along with online deceptive marketing practices more broadly. This case also marks the Bureau’s first successful enforcement effort regarding “astroturfing”, which is the practice of posting false online reviews that appear to be from customers or users.
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.
In addition, the AMP imposed on FlightHub – of $5 million – is the highest of all “drip pricing” cases since the Bureau started pursuing this activity in 2015. The following chart provides an illustration:
The size of the AMPs and the decision to pursue individual directors signals the Bureau’s commitment to enforcing the Competition Act to protect the digital marketplace, a message the Commissioner of Competition, Matthew Boswell, has been repeating consistently since his appointment in March 2019. As the press release that announced the settlement said, “[c]racking 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”. Companies – and their directors – should heed this warning and ensure their online marketing practices comply with Canada’s competition laws.
For more information contact our Competition/Antitrust & Foreign Investment Group