A Toronto firm has been fined a record $15 million in Ontario Superior Court for operating a business directory scam that targeted U.S. and Canadian businesses.
DataCom Marketing Inc. scammed more than 50,000 small- and medium-sized businesses in a telemarketing scheme that generated an estimated $158 million between 1994 and 2005.
The fine represents a record amount under the deceptive marketing provisions of the Competition Act.
"We applaud the court’s decision," said Melanie Aitken, commissioner of competition for the federal Competition Bureau, which led the investigation.
"This is a clear signal to fraudulent telemarketers that their acts will be treated seriously by the courts. In turn, we, at the bureau, will not hesitate to take action against fraudulent telemarketers when we uncover evidence that the law has been violated," she said in a statement Friday.
DataCom telemarketers succeeded in the scam by using an "assumed sale" technique. They implied that the business had ordered a directory listing in the past and it had been authorized by someone in the company. Telemarketers would then use aggressive collection tactics to ensure payment. The targeted firms were usually duped out of $200 to $500.
In his decision, Justice Ian Nordheimer of the Ontario Superior Court wrote that this sort of activity "must be deterred. It has impacts not only for businesses in this country, but also for Canada's international business reputation."
This marks the end of a long investigation for the Competition Bureau.
In July, the founder and former president of DataCom, Bernard Fromstein of Toronto, was sentenced to two years in jail and given a 10-year ban on telemarketing activities.
In April 2008, another senior manager, Paul Barnard of Ajax, Ont.,, was given a two-year conditional sentence after co-operating in the investigation.