In a warning to global carriers adopting AI for customer service platforms, Air Canada lost a small claims court case against a grieving passenger when it tried and failed to disavow its AI-powered chatbot.
The passenger claimed to have been misled on the airline’s rules for bereavement fares when the chatbot hallucinated an answer inconsistent with airline policy. The Tribunal in Canada’s small claims court found the passenger was right and awarded them $812.02 in damages and court fees.
Following the death of their grandmother, the passenger used Air Canada’s chatbot on the website to research flights which suggested the passenger could apply for bereavement fares retroactively. The passenger captured a screenshot of the chatbot’s response, which they showed to the Tribunal. The chatbot told the customer:
“Air Canada offers reduced bereavement fares if you need to travel because of an imminent death or a death in your immediate family…If you need to travel immediately or have already travelled and would like to submit your ticket for a reduced bereavement rate, kindly do so within 90 days of the date your ticket was issued by completing our Ticket Refund Application form.”
The crux of the Air Canada case lay in the underlined text, which was a live link to the airline’s Bereavement Fares Policy page on the airline’s website. That page contradicts the chatbot stating, “Please be aware that our Bereavement policy does not allow refunds for travel that has already happened.”
Air Canada argued that as the link was provided in the chatbot’s response the passenger had an opportunity to confirm the chatbot’s reply. But the court found Air Canada failed to explain why the passenger should not trust information provided on its website by its chatbot.
The passenger learned later through Air Canada employees that Air Canada did not accept retroactive bereavement applications, but still pursued the refund because “they relied on the chatbot’s advice” according to case records. Air Canada offered a $200 flight voucher to satisfy the passenger’s complaint, which the passenger refused.
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Chatbot Failure Was “Negligent Misrepresentation”
The Tribunal determined the claim against Air Canada constituted “negligent misrepresentation.”
“Air Canada argues it cannot be held liable for information provided by one of its agents, servants, or representatives – including a chatbot. It does not explain why it believes that is the case. In effect, Air Canada suggests the chatbot is a separate legal entity that is responsible for its own actions. This is a remarkable submission. While a chatbot has an interactive component, it is still just a part of Air Canada’s website. It should be obvious to Air Canada that it is responsible for all the information on its website. It makes no difference whether the information comes from a static page or a chatbot,” Christopher C. Rivers, Civil Resolution Tribunal Member, wrote in his decision on the case.
Rivers found Air Canada “did not take reasonable care to ensure its chatbot was accurate.” The airline failed to explain to the Tribunal “why the webpage titled ‘Bereavement travel’ was inherently more trustworthy than its chatbot. It also does not explain why customers should have to double-check information found in one part of its website on another part of its website.”
Has Air Canada Invested Too Heavily In AI?
TORONTO, CANADA: Air Canada planes grounded at the Toronto’s Pearson Airport 02 September due to … [+] the pilot strike. The pilots are demanding better salary’s and working conditions. Some 60,000 passengers are affected daily. AFP PHOTO/ Thomas CHENG (Photo credit should read THOMAS CHENG/AFP via Getty Images)
AFP via Getty Images
Air Canada introduced Artificial Intelligence Labs in 2019 to apply AI towards improving its operations and customer experience.
“Big data and AI are now a big part of our business,” Calin Rovinescu, Air Canada President and CEO told Future Travel Experience at time.
Last year, Air Canada also announced big plans for AI-powered voice customer service chatbots, which could ultimately replace the same people who explained to the bereaved passenger involved in the case that the website chatbot was wrong.
Curiously, as reported in Business Traveler, Air Canada’s Vice President and Chief Information Officer Mel Crocker acknowledged that the airline’s initial investment in AI-powered voice customer service is higher than paying their call center workers to handle simple customer questions.
“We’re not going into this with a view of killing jobs,” he said. “But if we can use a human to solve something that requires a human touch, and technology to solve something that can be automated, we will do that.”
In what comes across now as an ironic statement, Crocker added, “The biggest benefit of AI to us is that it fundamentally creates a better customer experience. And happier customers means they are travelling more with Air Canada.”
The small claims court case did not cost Air Canada much in terms of dollars and cents, but it hasn’t helped its customer service reputation. The airline could easily afford to pay the passenger the bereavement fare difference.
Had Air Canada done so, it would not have drawn so much attention to the problem as it researched what prompted the chatbot to misinform the customer. But the case raised important questions and potentially set a precedent on airlines’ liability for the performance of their AI-powered systems.
Consumer Rights Versus AI Hallucinations
AI tools are vulnerable to hallucinations, where they appear to make up information out of the blue.
“AI hallucination is a phenomenon wherein a large language model (LLM)—often a generative AI chatbot or computer vision tool—perceives patterns or objects that are nonexistent or imperceptible to human observers, creating outputs that are nonsensical or altogether inaccurate,” IBM IBM
explains on its website.
Air Canada’s rival WestJet went through one such hallucinatory incident in 2018. Its chatbot, Juliet, incorrectly interpreted a happy customer’s glowing comment on a cabin crewmember’s care over her succulent cutting and referred that customer to a suicide hotline. No harm was done in that case, and the airline’s customer found the situation amusing.
But as the more recent Air Canada incident shows, AI hallucinations can come at a price.
While airlines are not financial institutions, their handling of significant transactions and currency-like loyalty points and miles make them vulnerable to liability when a hallucinating AI misinforms consumers. The U.S. Consumer Financial Protection Bureau closely monitors the use of artificial intelligence and the impact of the technology on consumer rights.
In research published last year on banking chatbots, CFPB found chatbots can help answer basic customer questions, but “their effectiveness wanes as problems become more complex.”
“Review of consumer complaints and of the current market show that some people experience significant negative outcomes due to the technical limitations of chatbots functionality,” they noted in their report. “There are many kinds of negative outcomes for the customer, including wasted time, feeling stuck and frustrated, receiving inaccurate information, and paying more in junk fees. These issues are particularly pronounced when people are unable to obtain tailored support for their problems.”
CFPB also warned “financial institutions risk violating legal obligations, eroding customer trust, and causing consumer harm when deploying chatbot technology. Like the processes they replace, chatbots must comply with all applicable federal consumer financial laws, and entities may be liable for violating those laws when they fail to do so. Chatbots can also raise certain privacy and security risks. When chatbots are poorly designed, or when customers are unable to get support, there can be widespread harm and customer trust can be significantly undermined.”
Air Canada is not alone in using AI to answer common customer queries. Many airlines and airports worldwide have introduced automated chats and bots into their customer service flow directly on their websites and apps and on popular social media channels.
But as the technology is not infallible, airlines will need to consider their legal and financial exposure to AI hallucinations. They may need to rethink how far AI can take them at this stage.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
