Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC targets allegedly deceptive online business directory scheme, (Nov 19, 2013)

By Tobias J. Gillett, J.D., LL.M.

The FTC has filed a complaint in the federal district court in Chicago alleging that 15 companies and three individuals participated in a Montreal-based operation that induced consumers to pay for more than $14 million in unwanted listings in online business directories (FTC v. Modern Technology Inc., FTC File No. 132 3144, Case No. 13cv8257). The court has issued a temporary restraining order halting the operation and freezing its assets.

According to the FTC’s complaint, the operation sells listings in its online business directories through unsolicited telephone calls. The callers would allegedly claim to be calling to confirm a telephone number in a listing already requested by someone in the recipient’s organization, or to confirm the cancellation of such a listing. Consumers who provided contact information in response to these requests for confirmation would be sent invoices billing them $499 or more for listings and displaying the familiar “walking fingers” logo associated with local yellow pages directories.

Many consumers would pay the bills, assuming that someone in the organization had ordered the listings, the complaint alleges. Other consumers would pay after the defendants used partially recorded telephone calls, taken out of context, to convince the consumers that they had a binding oral contract. Consumers who refused to pay would receive collection calls and notices, frequently with added interest charges, late fees, and legal fees, as well as threats of collection agency referral, credit rating damage, and legal action. The defendants allegedly even established two third party debt collection companies to make threats to consumers.

The complaint asserts that the defendants violated Section 5 of the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers agreed to pay for business directory listings, and that consumers owed the defendants money for those listings.

The complaint lists as defendants Mohammed Khaled Kaddora, Derek Cessford, and Aaron Kirby, as well as 15 companies they operated, including: Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.

The temporary restraining order prohibits the defendants and those in “active concert or participation” with them from making the alleged misrepresentations, from misrepresenting the nature of their relationship to consumers, and from misrepresenting the purpose of their communication with consumers. The order also requires the defendants’ websites to bear a notice of the FTC’s lawsuit, freezes the defendants’ assets, requires third parties to forward their mail to the FTC, suspends collection on the defendants’ accounts, and requires the defendants to provide financial statements, among other provisions.

The FTC carried out its enforcement action in cooperation with the Royal Canadian Mounted Police (RCMP) and the Centre of Operations Linked to Telemarketing Fraud (Project COLT), an organization of U.S. and Canadian law enforcement authorities working to combat telemarketing fraud. According to a press release from the RCMP, evidence showed links between the scheme targeted by the FTC and a mass marketing fraud operation in Montreal targeted by the RCMP. The RCMP today arrested 15 individuals in connection with that operation, which allegedly conducted a variety of telemarketing scams. An individual suspected by the RCMP of using his money transfer and communications services company to launder the funds from those scams and those of other scammer networks also allegedly received a share of the money from the Yellow Pages scheme.

Companies: Modern Technology Inc.; Strategic Advertisement Ltd.; Dynamic Ad Corp.; Wisetak Inc.; Internet Solutions LLC; Yellow Pages Express Inc.; Yellow Pages Online Inc.; CessTech Inc.; SEO Online Inc.; SEO Online LLC; SEM Pundits Inc.; CC Recovery Corp.; M&A Recovery Inc.

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