ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-11-431525
DATE: 20120301
B E T W E E N:
The Commissioner of Competition Applicant
- and -
Yellow Page Marketing B.V., Yellow Publishing Ltd., Yellow Data Services Ltd., Yellow Business Marketing Ltd., Jan Marks, Steve Green, Brandon Marsh and BackOffice Support SL Respondents
Derek J. Bell and Keir D. Wilmut, for the Applicant
Andrew R.O. Jones and Rohit Parekh, for the Respondents
HEARD: January 10, 2012
LEDERMAN J.:
Nature of Application
[ 1 ] This is an application brought by the Commissioner of Competition (the “Commissioner”) for various final order relief including orders for restitution and administrative monetary penalties against the respondents pursuant to various provisions of the Competition Act RSC 1985 c.C-34.
The Commissioner’s Allegations
[ 2 ] The Commissioner is appointed under section 7 of the Competition Act as the officer responsible for the administration and enforcement of the Competition Act.
[ 3 ] The Commissioner alleges that the respondents have engaged in a scheme since January 2010 involving a number of false and misleading representations. The Commissioner submits that these representations caused thousands of Canadian businesses, individuals, and organizations, including charities and non-profit organizations, to inaccurately believe that the corporate “Yellow” respondents were the well known “Yellow Pages Group” (“YPG”). The Commissioner submits that the victims were induced to pay more than $2,000 each for the respondents’ so-called “agreed upon” services in circumstances where the victims would only have thought that they were updating their existing records with YPG to obtain some additional free Google advertising, when the fine print revealed that they were actually signing a new two-year contract with the respondents.
[ 4 ] Since 1908, the telephone directory known as the “Yellow Pages” has been distributed throughout Canada by YPG or its predecessors. YPG is the owner of a number of trademarks in Canada, including the phrase “YELLOW PAGES” as well as a variety of designs incorporating the “Walking Fingers” design. YPG has used some of these trademarks since at least as early as 1954 in developing business, involving more than 340 physical business directories reaching approximately 97% of the population of Canada. YPG has annual sales in excess of $1.4 billion and approximately 2500 employees in Canada.
[ 5 ] The respondents are in no way related to YPG. They operate internet directory websites as a common enterprise throughout multiple jurisdictions in the world. Because the respondents’ assets and operations are largely located in Europe, the respondents have operated in Canada largely through third party providers of office services.
[ 6 ] Prior to December 2009, the respondents did not carry on any business in Canada. In that month, they registered 13 internet domains for websites that have used and/or closely approximated YPG’s trademarks.
[ 7 ] The design of the respondents’ websites displays features remarkably similar to the Yellow Pages Business Directories. The words “Yellow Page” appear prominently. Until recently, the “Walking Fingers” design or a variant thereof appeared prominently and there is extensive use of the colour yellow. At the top of the web page are tabs for search boxes identical to those of the YPG website.
[ 8 ] The respondents made their website operational in January of 2010 and in the same month the respondents began sending unsolicited one-page faxes (the “Unsolicited Faxes”) to businesses, individuals and organizations across Canada.
[ 9 ] The Commissioner submits that these Unsolicited Faxes were designed to mislead existing or potential YPG customers into paying $2,856 to the respondents. The design of the Unsolicited Faxes contains the “Walking Fingers” logo, or a reasonable approximation thereof, and immediately to the right of that logo is, in large font, the words “Yellow Page” followed, in different lettering, by hyphen and the name of the province in which the business that sent the Unsolicited Faxes was located, followed by “.com” (for example, www.YellowPage-Ontario.com).
[ 10 ] Those who responded to the Unsolicited Faxes by filling out the requested information subsequently received invoices from the respondents.
[ 11 ] Two annual invoices (each for $1,428) that contained a design similar to the kind of invoice sent by YPG to those who advertised in the Yellow Pages Business Directories were sent by the respondents to those customers who replied to the Unsolicited Faxes.
[ 12 ] If a recipient did not pay the amount stated on the respondents’ invoice, the respondents sent as many as three follow-up invoices, reminder notices or letters which all bore a design similar to YPG’s design.
Complaints from Canadians
[ 13 ] The Commissioner is aware of more than 1,400 Canadians who claim to have been misled by the respondents’ representations. The complainants have usually said that they believe that the documents received from the respondents were actually sent by YPG. The vast majority of complainants did not read, notice or understand the fine print in the Unsolicited Faxes and did not intend to enter or realize that he or she was entering into a new contract with the respondents.
[ 14 ] Furthermore, the majority of complainants indicated that they would never have “ordered” the service (i.e. by returning the Unsolicited Faxes) if they had known that the respondents were unaffiliated with YPG and would not have paid the amount stated in the invoices.
[ 15 ] On May 5, 2010, in response to increasing complaints from Canadian consumers, the Commissioner issued a Consumer Warning outlining the improper conduct of the type engaged in by the respondents.
Proceedings Against the Respondents in Other Jurisdictions
[ 16 ] A number of courts and regulatory authorities in different countries have taken legal steps to shut down the respondents’ practices which are the same or substantially similar to those carried on in Canada.
[ 17 ] Following an application filed by the Federal Trade Commissioner, the U.S. District Court of Illinois, Eastern Division found that there was a strong prima facie case that certain of the respondents were violating U.S. law in an identical operation in the United States.
[ 18 ] Following an application filed by the Australian Competition and Consumer Commission, the Federal Court of Australia found the respondents’ representations to be misleading and false and issued final order relief against certain of the respondents and shut down an identical operation in Australia.
[ 19 ] The Federal Court of Australia characterized the respondents’ actions as a “directory scam” and found that through flagrant contravention of Australian competition law they had “engaged in conduct that was misleading and deceptive and was likely to mislead or deceive”. The respondents were ordered to pay penalties of $2.7 million (Australian). The respondents have not complied with the Australian court order and thus far have not paid any amount in respect of these penalties.
[ 20 ] The World International Property Organization, (“WIPO”) an international body that deals with internet domain disputes, has ruled that that the respondents’ conduct in using YPG’s trademark in connection with their Australian websites was seriously misleading.
[ 21 ] In May 2011, the respondents, Yellow Page Marketing B.V. (“YPMBV”) and Yellow Publishing Ltd. (“YPL”) entered into an “Assurance of Voluntary Compliance” with the Attorney General of the state of Iowa in which they agreed to cease similar marketing activities in Iowa.
[ 22 ] In June 2011, the Hague District Court in the Netherlands granted an injunction to YPG prohibiting the corporate Yellow respondents from using the “Walking Fingers” design.
Proceedings in Ontario
[ 23 ] In respect of this application, Justice Frank issued an interim injunction on July 28, 2011 under section 74.111 of the Competition Act, noting in her endorsement that the applicant has a strong prima facie case against the respondents. She expressly noted that the respondents had commenced trademark expungement proceedings in the Federal Court of Canada but that fact did not affect her conclusions.
[ 24 ] Justice Hainey, on August 10, 2011, granted, on consent, a temporary order and interim injunction, and an order that the respondents provide financial disclosure to the Commissioner. That order was continued by an order of Justice Low on October 31, 2011. While each of these orders was issued on consent of the respondents, no such consent was provided by third parties who were affected and as such in each instance the Court was required to be satisfied that there was a strong prima facie case on the merits, just as Justice Frank had found.
Alleged Non-Compliance with Orders of this Court
[ 25 ] The Commissioner alleges that the respondents failed to comply with specific orders requiring the production of information and more substantively have failed to comply with the injunction against their wrongful conduct through setting up and operating another company called Open Business Directory Ltd. (“OBD”), with a new, albeit, slightly modified website and using virtually identical Unsolicited Faxes.
Evidence Filed on this Application
[ 26 ] The respondents have filed an affidavit but have not produced their witness for cross-examination. The respondents state that the affiant, the respondent Jan Marks (“Marks”), suffered from heart problems and could not be subjected to the stress of cross-examination. The Commissioner has sought other alternatives, including proposing cross-examining Marks’ colleague and co-respondent, Steve Green (“Green”) but the respondents have not produced Green.
[ 27 ] In these circumstances, the respondents’ affidavit should be given little or no weight.
(Decision continues exactly as in the original document.)
___________________________
LEDERMAN, J.
DATE: 20120301
COURT FILE NO: CV-11-431525
DATE: 20120301
ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N:
The Commissioner of Competition Applicant
- and -
Yellow Page Marketing B.V., Yellow Publishing Ltd., Yellow Data Services Ltd., Yellow Business Marketing Ltd., Jan Marks, Steve Green, Brandon Marsh and BackOffice Support SL Respondents
JUDGMENT
LEDERMAN J.
Released: 20120301