On March 1, 2012, the Ontario Superior Court put an end to a deceptive marketing scam that had resulted in thousands of Canadians falling victim to false and misleading representations, to the tune of an estimated $7 million. In response to an application filed by the Commissioner of Competition, the court held that representations made to the public about a business directory service with a similar name and website to the well-established Yellow Pages business directory were false or misleading in a material respect, contrary to Section 74.01(1)(a) of the Competition Act. The court imposed an administrative monetary penalty (AMP) of $8 million on the related companies, and AMPs of $500,000 on each of the companies' two principals. The court also ordered that restitution be paid to the individuals that had been victimized by the scam.
Playing on Canadians' familiarity with the Yellow Pages business directory operated by the real Yellow Pages Group, the respondents had been marketing themselves under a similar name and offering online business directory services to Canadians since January 2010, leading many Canadians to believe that they were receiving communications from the established Yellow Pages Group. Through those communications, recipients were asked to "update" their existing records in order to obtain an additional free Google advertisement. A review of the fine print, however, revealed that it was actually an agreement to sign a new two-year contract for a fee of $2,856. If recipients did not respond and/or pay the requested fee, they were subsequently sent as many as three additional invoices, reminder notices or letters. The communications contained a logo similar to that of the real Yellow Pages Group, and referenced "Yellow Page" (no "s") in large font. In reality, the communications were coming from companies and individuals that were in no way related to Yellow Pages Group or its business directory service.
In its decision, the court held that the communications had intentionally been designed to mislead recipients to believe that they were updating information on their existing Yellow Page Group listing. This was evidenced by the language in the communication that instructed recipients to "correct and add any additional information", and also referenced an alleged account number that signalled an existing business relationship. In its decision, the court considered both the materiality of the misrepresentations, as well as the general impression, finding that the communications were clearly designed to appear to have been sent by Yellow Pages Group, and that the majority of recipients would not have paid had they known the entities were not affiliated. The court noted that the reference in the legislation to promoting any "business interest" should be given wider meaning than just reference to sales, such that threats made in relation to collecting fees met the threshold of a "business interest". The court also found that the fine print, which stated that the recipient would be entering into a two-year contract, did not reduce the false or misleading nature of the representation in the broader communication.
In the court's order for AMPs, an important aggravating factor was that the companies had engaged in identical conduct in other jurisdictions, including Australia (where the Federal Court imposed a $2.7 million (Australian) AMP, and with which the companies have yet to comply), and continued to engage in offensive conduct in Canada even after an interim injunction was issued in July 2011. The scam also targeted charities and other non-profit organizations, which the court described as vulnerable individuals likely to be adversely affected. These factors, coupled with its scepticism that the responsible persons would self-correct their behaviour in the marketplace, led the court to impose the largest AMPs ordered to date in contested proceedings under the Competition Act.
The international aspect to this case is noteworthy, particularly given the breadth of foreign authorities and consumer organizations that were involved in related investigations. The Competition Bureau acknowledged working with the U.S. Federal Trade Commission, The Australian Competition and Consumer Commission, and the National Fraud Intelligence Bureau of the UK, in addition to the International Consumer Protection and Enforcement Network and consumer protection organizations in almost 40 countries. These investigations were directly referenced in the court decision in Canada as evidence of the extent and severity of the offensive conduct. The case clearly evidences both a willingness of competition and consumer protection authorities to work together when investigating misleading marketing and advertising practices in multiple jurisdictions, and a willingness of courts to consider a company's conduct and compliance record in other jurisdictions when assessing potential fines under Canadian law.
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