FTC Charges Canadian Company with Fraudulent Sales of Business Directories

The Federal Trade Commission today announced that it has taken action against a Canadian company that deceptively markets “business directories” to small businesses across the U.S. According to the FTC complaint, telemarketers for Datatech Communications, Inc. call U.S. small businesses and tell them that they are calling to “renew” a listing in a business directory, sometimes stating or implying that these are listings in a telephone directory. The FTC alleges that the defendants employ deceptive practices in order to get consumers to agree to these “renewals.” Consumers usually discover, however, that their company has never previously purchased a directory listing from Datatech. The FTC alleges that Datatech makes it very difficult for consumers to cancel these listings, and that the defendants carefully disguise the fact that they are not located in the U.S. but are actually based in Quebec, Canada.

Datatech’s Alleged Business Practices

The FTC contends that since at least 2000, Datatech representatives have called American consumers in an attempt to trick them into buying the business directory. According to the FTC, callers frequently do not disclose their identity, or often claim to be with the Yellow Pages or a local telephone company. In both cases, the FTC alleges, callers assert that the consumers have previously purchased a directory listing and are now calling to renew that listing.

Datatech typically charges $299.95 for a two year listing in its directory, along with a copy of the AT&T National Business Buyers Guide, plus shipping and handling charges. In some instances, even when the consumers have said they do not want to renew or simply want additional information they have been billed anyway, according to the FTC. In many instances, consumers discover that they never initially purchased a directory listing from Datatech and that they were billed for a “new” purchase instead of a renewal. Some consumers are told that this is a renewal, but later learn that their previous listing in the directory was “complimentary” and that the business had no previous dealings with the defendants at all.

According to the FTC, when consumers are reluctant to renew, such as when they are not authorized to make purchases, sometimes the callers assure them that they can always cancel without financial obligation when they receive the bill. But when consumers try to cancel, the FTC alleges that Datatech refuses to honor the requests, often arguing that consumers must first pay a cancellation fee, which typically ranges from $49.00 to $159.00. When consumers refuse to pay the invoices because of the deceptive tactics used to obtain the “sale,” Datatech refers their accounts for collection and threatens to damage their credit ratings, according to the FTC.

The Commission’s Complaint

The FTC’s complaint contains three charges against the Datatech defendants, each of which alleges a violation of Section 5 of the FTC Act prohibiting unfair and deceptive acts of commerce. Count I alleges the defendants falsely represent that consumers have a previous business relationship with Datatech, and have previously authorized their listing in the business directory. Count II alleges that the defendants falsely represent that the consumers have a right to cancel their directory listings without financial obligation. According to the FTC, although Datatech representatives assure consumers that they can cancel the directory risk free, Datatech only provides partial refunds. Count III charges the defendants with falsely representing that consumers have agreed to purchase listings in the directory.

The FTC contends that consumers throughout the United States have lost millions of dollars as a result of Datatech’s unlawful business practices. In filing the complaint, the FTC is seeking preliminary and permanent injunctive relief, including consumer redress, against Datatech Communications, Inc., Datatech-Quebec, and I-Point Media, along with executives Robert Brewer, Elias Bakomichalis, and Gregory MacNeil.

The Commission vote authorizing the staff to file the complaint was 5-0. It was filed under seal in the U.S. District Court for the Northern District of Illinois, in Chicago, on September 8, 2003. On September 8, the Court issued a temporary restraining order prohibiting deceptive claims and freezing the assets of the defendants. The FTC’s Midwest Region handled the investigation and court filing.

The FTC has worked closely with the Illinois and Washington Attorneys General, the Chicago Better Business Bureau, and the Canadian Competition Bureau in this case, and expresses its gratitude for the fine cooperation it has received from these consumer protection officials.

NOTE: The Commission issues or files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law. The case will be decided in court.

Copies of the complaint and other related documents pertaining to Datatech are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.