Yellow Pages Ltd. (TSX:Y), once the country’s largest publisher of telephone directories, has taken aggressive steps to reinvent itself as a digital advertising platform – but current and former customers say this strategy includes locking them into contracts they did not agree to and threatening them with lawsuits and collection notices until they pay for services they do not want.
The company has hundreds of negative online reviews and an “F” rating from the Better Business Bureau (BBB); it has also been involved in hundreds of lawsuits across Canada.
Both customers and lawyers question the legal validity of what are typically verbal, over-the-phone agreements between small-business owners and Yellow Pages. Often, however, the threat of legal action, the risk to a company’s credit rating and the sheer cost of disputing a small claim in court have pushed business owners to simply settle the claims against them and move on.
“It would cost me maybe like $1,000 to buy out my contract for what I had left, and it would probably cost me $1,000 in lawyer’s fees, plus my headache,” explained Jacqueline Laundrie Krokis, the owner of Jack Pine Dental Hygiene in Slave Lake, Alberta. “I just decided to pay it out.”
When she signed up for monthly digital advertising services with Yellow Pages, Laundrie Krokis said, she was promised she could change the terms of her plan at any time. When she tried, she said, a Yellow Pages representative told her she had agreed to a full year of services and that she could only upgrade her monthly plan.
“It is a hardship for a small business, their first year, to pay an extra thousand dollars,” she said. “Everyone I talk to, I say, ‘Please stay away from Yellow Pages.’ This was the biggest mistake that I made in opening my business.”
Yellow Pages, headquartered in Montreal, did not respond to repeated requests for an interview, but eventually provided written answers to a list of questions by email through a representative of public relations firm National. In the email, the company responded to small-business owners’ concerns by stating that each case is different, that their customers always come first and that their customer service department investigates instances of customer dissatisfaction and provides remedies.
“As professionals working with professionals, we focus on added value and clear business agreements,” wrote the company.
But a dozen former Yellow Pages clients who shared their stories with Business in Vancouver disagree, as do the hundreds of individuals and small-business owners who have logged complaints with BBB, on Facebook (Nasdaq:FB) and Google (Nasdaq:GOOGL) and with review websites like SiteJabber, where the company has 152 one-star reviews. These make up 97% of the 157 reviews logged on the site at the time of writing.
“It’s unbelievable,” said Wayne Lackner, owner of Urban Cedarworks Ltd. in Victoria. “It’s unbelievable how they can conduct their business like that and still be in business.”
The stories vary, but they typically feature the same complaints: misleading sales information and unclear business terms, an immense struggle to contact a customer service representative and charges for services the customer believes were not agreed to. Unpaid invoices get followed up with automated calls, collection notices and legal threats.
Over the phone, Harmeet Singh, owner of Burnaby-based Centrum Electric Ltd., signed up for Yellow Pages digital advertising services for $250 a month.
“After two months – two and a half months – I realized I didn’t get even a single job,” said Singh. After one lead in five months, he decided to cancel his subscription, but was told he had agreed to a one-year contract. He said the company offered to switch him to a $100-a-month plan if he agreed to start a new one-year contract.
Singh refused to pay, and his $2,500 tab continues to grow. He said the repeated threats to send his account to collections are torture.
“I’m so depressed about it,” he said. “I’m a poor guy. I’m a poor businessman. I can’t pay. I don’t want to pay them, honestly. It is not about $250; it is about the principle.”
Richard Thompson, owner of Pest Xpress Inc. in southern Ontario, said he agreed to three months of services in 2016 at $300 a month.
“I agreed to the three months just over the phone; there’s nothing to sign, just a verbal agreement,” said Thompson, who received three calls and one lead through Yellow Pages during that time. “I thought that was it, that it was over. They wanted me to go longer; I wasn’t interested.”
At the end of January 2017, he got a $300 bill. A company representative told him, “‘Because we couldn’t get a hold of you, we automatically renewed you again for your contract,’” Thompson recalled.
“You’re telling me that a lack of me saying ‘No’ means I mean ‘Yes’? They said, ‘Well that’s company policy.’ That’s pretty much their answer at Yellow Pages for everything, is ‘It’s company policy so we can do what we want.’”
Because legal fees would have surpassed what he owed and because he didn’t want to risk affecting his credit score, Thompson paid Yellow Pages $900 in 2017 for services he says he didn’t want and did not agree to.
Urban Cedarworks has been in business for almost 20 years, and Lackner was a Yellow Pages client for many of them. He used to receive an annual service confirmation from the company, but didn’t in 2016. He did, however, get a charge on his credit card.
“They never sent me any confirmation of my contract. No emails and no voice mails. Supposedly they said that they left me five messages, but it was on a pager,” he said, and one that was out of service. “It was almost impossible to get a hold of anyone to deal with it.”
After three to four days of emails, phone calls and letters to Yellow Pages offices in B.C. and Montreal, Lacker said Visa Inc. (NYSE:V) reversed the charges. Visa also reversed them a second time when new charges came through the following month.
“If it wasn’t for Visa going to bat for me, I think I would have had a hard time,” said Lackner. “It was crazy what they sort of made you do.”
Yellow Pages relies heavily on the claim that it establishes verbal contracts with clients over the phone. Verbal contracts are legitimate, but still require the three main elements of a legally enforceable contract: an offer, acceptance and consideration. In the cases above, Yellow Pages presented an offer of services, and, the company claims, the customer accepted that offer. Consideration is the exchange of value, such as money paid for digital advertising services rendered.
“I would say the issue here is acceptance, and whether or not the acceptance is valid,” said lawyer Dana Gordon, founder of Benchmark Law Corp. “If the person on the other end doesn’t know exactly what they’re agreeing to or accepting, then the contract wouldn’t be valid.”
Gordon added that a contract requires that the intention behind it is clear and mutually understood. She said the amount of uncertainty and confusion around what Yellow Pages appears to offer customers – and how – calls acceptance into question.
“I would say it’s very possible that these so-called contracts that they’re entering into are not binding,” Gordon said. “If Yellow Pages wants to sue you, let them. Because they’re going to have to prove that it’s valid, and I think it’s going to be tough.”
Yellow Pages has sued. Since 2005, the company has been involved in more than 220 provincial small claims cases in British Columbia.
Jas Chung, founder and CEO of Bombay Hair, said she was locked into a contract without her consent and, even though Yellow Pages incorrectly listed her company information, she settled the court claim for fear her credit would be affected.
Don Bailey, owner of Prince George-headquartered Fox Professional Driver Training Centers Ltd., paid $6,000 to settle 50% of his claim. His issue dated back to when Yellow Pages printed physical phone books. Even though his business had moved, he said, Yellow Pages printed an ad without his approval or review, and with incorrect information.
“I just let ’em have it,” said Bailey. “I’ve heard nothing but horror stories about it up here.”
More than 1,300 cases have been filed in the Court of Quebec in the last three years, according to lawyer Jean-Philippe Caron, founder of Calex Legal Inc.
“It’s a pure intimidation tactic,” said Caron, who believes the company banks on smaller businesses not understanding how to respond to or challenge Yellow Pages’ claims. “Ninety-five per cent of the cases go by default because people don’t have the money, the resources, to know what’s going on or to defend themselves.”
Calex is preparing a class-action lawsuit against the company in Quebec. Caron presented the case to a judge in December and is awaiting a decision on whether the case can proceed. The lawsuit hinges on a unique article in the province’s civil laws that allows for an individual to cancel a contract before its term. This right can be renounced, and Caron has argued Yellow Pages failed to explain to its customers that in entering into Yellow Pages contracts, customers were giving up that right.
Caron said Yellow Pages aggressively pursues customers in court over small claims, and that his firm has identified between 600 and 700 individuals whose cases were surrendered by default because they had failed to respond.
The default ruling has serious implications, giving the company the right to seize houses, bank accounts and other assets. After a judgment has been rendered, there is nothing customers can do, Caron said.
“We think there’s been some abuse here,” said Caron. “We’re going to get a fair compensation for the little companies that got often trapped in a contract they didn’t understand.”
It typically makes little financial sense to hire a lawyer to fight a small claim in court. Filing fees alone can cost hundreds of dollars, and legal fees can quickly stretch into the thousands.
Court records show that some companies have, however, pushed back against Yellow Pages’ claims.
Yellow Pages sued Bruce Muirhead and Surrey-based Kingdom Truck Accessories Ltd. in 2015 for more than $15,600, even though Kingdom Truck owner Scott Muirhead said his brother had nothing to do with the original service contract and wasn’t involved with the company at the time.
A corporate registry report shows Bruce Muirhead was not an officer or director of the company at the time Yellow Pages filed its claim, which argued that he was. Bruce Muirhead and Kingdom Truck filed a counterclaim alleging Yellow Pages had failed to perform each and every term of their agreement, and that as a result, the business suffered losses of over $10,300. Yellow Pages withdrew its claim.
In 2013, Yellow Pages claimed the Royal Oak Golf Club had failed to pay a nearly $5,000 invoice for 2012. The club argued the contract should have expired in 2011, and court documents show it considered seeking relief from the court after it said Yellow Pages continued to harass the club and charge interest on an amount that was being disputed in court. Yellow Pages did not file the required trial statement, nor did it attend trial. Its claim was dismissed.
In 2015, Yellow Pages went after Vancouver lawyer Glen Sherman for close to $15,000 plus interest. Sherman responded that there should have been no amount owing, and Yellow Pages withdrew its claim about six weeks after mediation.
“I understand it can be very intimidating when you have a business calling you and telling you that you owe them money,” said Benchmark Law’s Gordon, who has doubts about Yellow Pages’ claims. “If they want to threaten lawsuits, then I would just call their bluff and say, ‘OK, sue me.’”
Outside of following through with a lawsuit, the options for businesses in such a situation are limited.
While Yellow Pages has a rating with BBB, it isn’t a member. Consumer Protection BC can provide assistance only on issues between consumers and businesses, and not on issues between companies. The Competition Bureau could not confirm whether it has investigated Yellow Pages because it undertakes its work confidentially.
However, the bureau wrote to BIV that Canada’s Competition Act prohibits the making of materially false or misleading representations – ones that could lead a person to a course of conduct that they believe to be advantageous. In determining a misleading representation, the bureau wrote, a court takes into account a representation’s literal meaning, as well as the general impression conveyed.
The small-business owners who spoke to BIV said they received few to no leads from their subscription with Yellow Pages, and claimed they were given assurances – that they would be able to change their contract, for instance – that turned out to be false.
British Columbia’s Business Practices and Consumer Protection Act states consumers may cancel a continuing services contract at any time if there is a material change in the services provided by the supplier, such as when services are not completed. However, the act is intended to protect consumers, not businesses. Its application would depend on the case and would have to be argued in court.
Yellow Pages referred BIV to its advertising terms and conditions, which are available online. The company wrote that most services provided to small businesses are for 12-month terms, which get automatically renewed for another term unless customers provide written notice of non-renewal at least three months before the end of the term, according to the company’s website. The company also stated that these terms are explained to customers when they purchase services. Many customers strongly disagree.
“When faced with the idea of taking time off work, going down to the court registry, paying your fees, having to navigate the whole process, which can take quite a long time, a lot of people just choose not to pursue their legal rights,” said Shannon Salter, chair of the province’s Civil Resolution Tribunal (CRT).
“I think that can be very frustrating for people, and multiplied across an entire society, I think it can erode confidence in the justice system, because people don’t have access to justice for their everyday disputes.”
The CRT handles contract disputes and has exclusive jurisdiction over small claims cases under $5,000, which get referred to it by default.
Salter said the CRT has filled a gap in the justice system by providing consumers with tools and free, online, plain-language legal information to better understand disputes. Fees for a tribunal decision cost a fraction of the legal costs associated with going to court, and, on average, the 5,000 small claims cases the CRT handles each year get resolved in four months – less than half the nine to 11 months it took similar cases to work their way through the court system.
The CRT would now by default handle any small claims under $5,000 brought forward by Yellow Pages in British Columbia. CRT and Canadian Legal Information Institute databases show no tribunal decisions involving the company.
In 2009, there was an attempt at a class-action lawsuit against the U.S. company Yellowpages.com LLC, then owned by AT&T Inc., for breach of contract and for violations of the New Jersey Consumer Fraud Act. It alleged New Jersey business owners were induced into contracts through fraudulent misrepresentations and omissions concerning Yellowpages.com’s services and the terms and conditions of its service agreements.
The judge presiding over the case denied its certification, partially on the grounds that the experiences of the plaintiffs varied too much to establish a class action. However the facts presented in the decade-old lawsuit are virtually identical to the complaints facing the Canadian Yellow Pages today.
“These practices are not new; they’ve been happening for many years,” said Olivier Vincent, founder of Canadian Phone Directories Holdings Inc. (Canpages), which was acquired by Yellow Pages in 2010.
“You can have these aggressive behaviours when you’re the monopoly, which is where they were before Canpages arrived,” said Vincent. “It really helped our company to be what we wanted to be: to be the liberator of a market that was dominated, too dominated, by one company.”
That market has since seen a revolution, with a wide range of companies – Google, Facebook, Yelp, HomeStars and TrustedPros among them – focused on customizing and enabling searches for services.
“I don’t know who’s going to Yellowpages.ca anymore,” Vincent said.
The marketing services Yellow Pages provides to small and medium-sized businesses generate the bulk of the company’s revenue. In 2017, these services were responsible for 79% of the $746 million the company brought in. More than two-thirds of those services were digital.
The company’s balance sheet reflects its struggle to adjust to a landscape that has evolved drastically over the last decade.
In 2017 – the most recent fiscal year available – Yellow Pages posted a $589-million net loss. The company lost 12,500 customers after losing 3,500 the year before. Its revenues have fallen 54% over 10 years.
In 2018’s third quarter, Yellow Pages fully divested its real estate division, sold RedFlagDeals.com and shed 1,617 employees year-over-year.
It also saw its revenue fall 26% to $130 million, but it was in the black with profits of $27 million, up from a $7 million quarterly loss the year before.
Many business owners can’t help but feel they are bearing some of the costs of Yellow Pages’ aggressive attempts to balance its books.
“It’s so infuriating,” said Laundrie Krokis. “You’re getting into a contract, they’re not explaining it properly … by telling you that you can change your plan.”
Even after she cancelled her plan and paid out her year, she kept getting monthly charges from Yellow Pages.
“I told them…, ‘This is a hardship for me.… I do not want to be paying this. This is coming straight out of my pocket.’”
Ross McLarty, partner with McLarty Wolf Litigation Lawyers, said it’s “very odd” to see companies rely on verbal contracts in business-to-business transactions, particularly when a large, established company is involved.
“The reason why businesses don’t use verbal contracts is because they’re unreliable, difficult to prove,” said McLarty. “It’s amazing to me that there’s not some confirmation by email.”
The best way to hedge against that uncertainty is to ask that a contract be put in writing, and to read it fully – fine print and all – before signing the agreement.
If a verbal contract has already been made or is the only option available, business owners can immediately send an email or write a letter to the other party detailing what was discussed, the terms of the agreement, what was intended and what was promised. Doing so creates a written record that can be easily accessed should issues arise.
People’s Law School in Vancouver recommends that individuals thoroughly research a company they plan on contracting with, which includes visiting review sites and social media pages. The school’s website provides information on the steps someone should take before entering into an agreement, an individual’s legal rights in contract disputes and answers to common contract questions. It also offers free contract templates, and templates for letters to formally complain about a poor standard of service or to cancel a contract that has been breached.
The Canadian Bar Association’s B.C. branch offers a legal hotline with free legal information 24 hours a day, seven days a week, which is also available online.
“You don’t want to go around complaining,” said Laundrie Krokis, who had only a verbal contract and chose not to invest the time, money or energy to take her case to court. “I just kind of wanted to save people from having the similar experience.” •