Competition Bureau Sues to Shut Down Business Directory Scam

OTTAWA, ONTARIO--(Marketwire - July 28, 2011) - The Competition Bureau announced today that it has taken action against five companies and three individuals to ban a deceptive marketing scheme targeting businesses across Canada. The Bureau is seeking an injunction to put an immediate end to the deceptive marketing representations, freeze corporate assets for future restitution to victims, and stop the deceptive conduct.

The Bureau's action comes after an international investigation uncovered a business directory scheme targeting Canadian and international businesses, in violation of the false or misleading and deceptive practices provisions of the Competition Act. The U.S. Federal Trade Commission (FTC) is undertaking a simultaneous court action against U.S. targets involved in this case.

The investigation found that the individuals and companies sent faxed forms to targets displaying symbols that closely resemble the well-known trademark of the Yellow Pages Group (YPG), thus deceiving businesses into believing the forms came from the YPG. Businesses were led to believe that the forms were intended only to update contact information for an online business directory listing but, buried in the fine print, was a stipulation that by returning the form, the businesses were committing to a two-year contract for the listing, at an annual cost of $1,428.

The Bureau's action filed in the Ontario Superior Court of Justice seeks, among other things, that the targets:

• pay administrative monetary penalties totalling $11,550,000;

• publish corrective notices; and

• pay restitution to the victims of this scam.

"This scam has targeted thousands of businesses in Canada and around the world, forcing them to pay for a directory listing of little or no value," said Melanie Aitken, Commissioner of Competition. "We are committed to cracking down on fraud that victimizes consumers and businesses. Significantly, the action we are taking today underscores the importance of working with our international partners to frustrate these types of multi-jurisdictional scams."

The Bureau has been working closely with the FTC throughout this investigation. "We are committed to collaborating with our international partners in combating fraud that preys on consumers and businesses," said David Vladeck, Director of the Bureau of Consumer Protection for the FTC. "We applaud our colleagues in Canada for leading this international effort and also for providing support in our investigation."

The National Fraud Intelligence Bureau (NFIB) and its counter fraud partners in the UK support the action being taken by the Competition Bureau against Yellow Page Marketing B.V. The NFIB is also taking action to eliminate the harm caused by deceptive use of virtual offices in the UK. "Robust action is necessary to disrupt the fraudulent use of organizations that often unknowingly provide logistical support to these types of scams," said Richard Waight, Deputy Director of the NFIB.

The Australian Competition and Consumer Commission (ACCC) recently undertook a court action against two of the companies sued by the Bureau—Yellow Page Marketing B.V. and Yellow Publishing Limited—that resulted, among other things, in penalties of $2.7 million. "It is essential to ensure scammers cannot use borders to evade detection and enforcement action," said Peter Kell, Deputy Chairman for the ACCC.

For additional information regarding the Bureau's investigation, please see the Backgrounder.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

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