In the courts: 2004

Court Proceedings, Judgments and
Court Orders

To protect confidential information, the Bureau does not reveal the names of the companies involved unless they were otherwise made public.

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Performance Marketing Ltd.

Date: 2004-12-13
Event: Consent Agreement
Court: Competition Tribunal
Court File Number: CT-2004-014
Parties: Performance Marketing Ltd., Kevin Atkinson and Duane Gartman
Provision(s): 74.01(1) (b) of the Competition Act - Performance Claims
Summary: On December 13, 2004, the Competition Bureau filed a Consent Agreement with the Competition Tribunal resolving concerns over the performance claims made by Performance Marketing Ltd. for the sale of the Dyapex and Zyapex Diet Patches.

Performance Marketing made claims that the patches were a safe and natural weight-loss product, giving the false impression that without performing any physical exercise or dieting, a person could lose weight, reduce their appetite, control their cravings and speed up their metabolism. Performance Marketing also failed to enforce its anti-SPAM policy, which led to its affiliates' use of SPAM as a means of selling Performance Marketing's products.

According to the Consent Agreement with Performance Marketing, the company has agreed to:

• ensure that SPAM is not used as a means of marketing its products;
• cease making any performance claims to the public unless the Competition Bureau agrees that the claims are based on adequate and proper tests;
• post a corrective notice on their Web site; and
• provide a full refund to those who purchased the diet patches.

Court Documents:
Regi stered Consent Agreement
PDF (749KB)

News Release:
2004-12-13 - Consumers to Receive Full Refund for Bogus Diet Patches
Competition Bureau Announces Resolution of First Case Under Project FairWeb

Global Online Systems Inc.
Date: 2004-11-23
Event: Guilty Pleas and Prohibition Order
Court: Federal Court (Vancouver)
Court File Number: T-1824-04
Parties: Global Online Systems (GOLS) and Marilyn Thom and Deborah Jane Stoltz
Provision(s): 55 of the Competition Act - Multi-level marketing; 55.1 of the Competition Act - Schemes of Pyramid Selling
Products: Health-related products
Summary: In November 2004, two charges were laid in Vancouver, B.C., against Global Online Systems Inc. for allegedly recruiting new participants to its multi-level marketing plan by exaggerating income expectations without disclosing the income of a typical participant in the plan and for operating an illegal scheme of pyramid selling by offering recruitment based compensation to participants, and requiring the purchase of product as a condition of joining the plan.

On November 23, 2004, Global Online Systems Inc. plead guilty to two counts, and agreed to pay a fine of $150,000. The company, and its two principals, Deborah Jane Stoltz and Marilyn Thom, agreed to the conditions of a prohibition order requiring that they:

• not operate or be involved in a scheme of pyramid selling;
• inform existing participants in GOLS of the contents of the order;
• disclose the average earnings of GOLS participants;
• amend the GOLS participant agreement; and
• pay the Commissioner’s costs.

Court Documents
Indictment- PDF (98.9 KB)
Prohibit ion Order - PDF (191 KB)

News Release:
2004-11-23 - Herbalife marketers plead guilty to pyramid selling

All Communications Network of Canada Co.

Date: 2004-11-03
Event: Court decision
Court: Halifax Provincial Court
Court File Number: 1222594
Parties: All Communications Network of Canada Co.
Provision(s): 55 of the Competition Act - Multi-level marketing; 55.1 of the Competition Act - Pyramid selling
Products: Long-distance telecommunication services

Summary: In August 2002, eight charges were laid in Halifax, N.S. against All Communications Network of Canada Co.(ACN) for allegedly recruiting new participants to its multilevel marketing plan by exaggerating income expectations without disclosing the income of a typical participant in the plan and with operating an illegal scheme of pyramid selling by offering recruitment bonuses to participants who paid for the right to recruit other participants.

On November 26, 2003, the Honourable Judge Patrick H. Curran JPC ruled at the conclusion of a preliminary hearing into these charges that there was not sufficient evidence to show that ACN was operating as a multilevel marketing plan as defined in the Competition Act and as such he discharged ACN on all charges.

Under the Competition Act, if a company's marketing plan does not meet the definition of a multilevel marketing plan, then the multilevel marketing and pyramid selling scheme provisions of the Act do not apply to that company.

News Release:
2002-08-29 - Multi-level Marketing Firm Charged for Misleading Participants

Medical Discount Inc. (Canada) of Toronto, Ontario

Date: 2004-09-03
Event: Guilty Plea
Court:Ontario Superior Court of Justice
Court File Number: M18-03
Parties: Medical Discount Inc. (Canada) of Toronto, Ontario
Provision: S. 52.1(3) of the Competition Act - deceptive telemarketing
Product: Medical discount package

Summary: Between March 2001 and January 2003, telemarketers of Medical Discount Inc. (Canada) of Toronto, Ontario used high pressure sales techniques to induce potential clients - residents of the U.S. - to purchase a medical discount plan and release bank account information. Funds were then withdrawn without authorization from the client. In addition, promises of a free trial period and refund conditions were not always respected.

The Bureau's investigation resulted in a guilty plea from Medical Discount Inc. (Canada). The company was fined $125,000 and received a four-year prohibition banning it from engaging or participating in, or assisting others in any activity involving the sale or offer for sale of health-care discount programs.

Medical Discount Inc. (Canada) was associated with nine Ontario corporations in the promotion of discount cards under the names MedPlan and Global. The corporations are STF Group Inc., Chembe Management Inc., Thunderchild Consulting Inc., SMAKK Consulting Inc., 1108114 Ontario Inc., Great Sailing Management Inc., GTCQ Inc., 487948 Ontario Limited, 1349927 Ontario Inc., and one federally incorporated corporation Q-Prompt Inc. The directors of these corporations are Allan Shiell, Julian Shiell, Chris Quilliam, Sean Zaichick, Cory Besser, Nicholas Bridges, and Alex Korn. The corporations and directors are also subject to the prohibition order.

The Bureau developed this case in cooperation with the FTC. The FTC filed a separate consumer protection action in the United States, which is ongoing.

Anitech Enterprises Inc. (PetNet)

Date: 2004-07-28
Event: Guilty Plea/Prohibition Order
Court: Federal Court of Canada
Court File Number: T-1373-04 and T-1374-04
Parties: Anitech Enterprises Inc./Paul Brown
Provision(s): 52(1) of the Competition Act - False or Misleading Representations
Products: Pet microchip identification

Summary: Anitech Enterprises Inc., also known as PetNet, pleaded guilty and was fined $150,000 for misleading thousands of pet owners through a deceptive mail campaign. In addition to a 10-year Prohibition Order imposed on PetNet, Mr. Paul Brown, a former senior executive of PetNet, also agreed to abide by a Prohibition Order.

From 1991 to September 2002, PetNet advertised and marketed its pet microchip and recovery service as a nominal, one-time, lifetime fee, with no annual renewal fees. It built its customer base to over 400,000 registrants across Canada, mostly under the direction of Mr. Brown. On January 1, 2003, PetNet changed its fee policy instituting an annual administration fee of $19.95 for registrants, both new and old. PetNet's decision to apply this new policy to its pre-2003 registrants raised concerns under the Competition Act and caused the Bureau to intervene. The Bureau's investigation confirmed that PetNet sent approximately 400,000 mailings to pre-2003 registrants in several provinces across Canada which gave the impression that payment was required to keep one's pet registered.

News Release:
2004-07-28 - PetNet Pleads Guilty and Pays $150,000 Fine for Misleading Mailings

Urus Industriel Corporation (Koolatron)

Date: 2004-07-22
Event: Consent Agreement
Court: Competition Tribunal
Court File Number: CT-2004-011

Parties: Urus Industrial Corporation o/a Koolatron
Provisions: 74.01(1)(a) and 74.01(1)(b) of the Competition Act - False or Misleading Representations.
Product: Electronic muscle stimulation device

Summary:
In July 2004, Urus Industrial Corporation, doing business as Koolatron (Urus) and the Commissioner of Competition registered a Consent Agreement with the Competition Tribunal concerning the sale and marketing of the AB Energizer, an electronic muscle stimulation (EMS) device. The Bureau’s inquiry concluded that Urus, through infomercials and its Web site, made representations that could give consumers the false impression that by using the device they could lose weight, obtain well-defined abdominal muscles and replace the workout benefits of a fully-equipped gymnasium, without doing any physical exercise.

According to this consent agreement, Urus agreed to cease the sale and marketing of the device and any similar devices that offer weight loss or muscle toning where exercise is not required, unless the Commissioner agrees that the claims are based on adequate and proper tests. Urus also agreed to refund any unsatisfied consumers, to broadcast corrective notices on each of the television stations that were initially used for the promotion of the AB Energizer and to pay an administrative monetary penalty in the amount of $75,000. Urus also agreed to establish, implement and maintain a formal Corporate Compliance Program regarding the use and content of advertisements and other promotions.

Court Documents
Consent Agreement PDF: 338 KB

News Release
AB Energizer Removed from Market following Competition Bureau Investigation

 

The Forzani Group

Date: 2004-07-06
Event: Consent Agreement
Court: Competition Tribunal
Court File Number: CT-2004-010
Parties: The Forzani Group Ltd.
Provisions: 74.01(2) and (3) of the Competition Act - Ordinary Price: suppliers generally and supplier's own

Summary:On July 6, 2004, the Commissioner of Competition and The Forzani Group Ltd. filed a consent agreement with the Competition Tribunal addressing the Commissioner's concerns under the Ordinary Price provisions of the Competition Act.

The agreement stemmed from a Competition Bureau investigation regarding concerns that The Forzani Group Ltd. had overstated the regular selling prices of certain products at its Sport Chek and Sport Mart stores.

The Act requires that one of the two following tests are met when setting a regular selling price:

• either a substantial volume of the product was sold at that price or a higher price within a reasonable period of time before or after the making of the representation (volume test); or
  
• the product was offered for sale, in good faith, at that price or a higher price for a substantial period of time recently before or immediately after the making of the representation (time test).

Under the terms of the agreement, The Forzani Group Ltd., which operates 217 corporate stores under the banners of Sport Chek, Sport Mart and Coast Mountain Sports and 174 franchise stores under the banners of Sports Experts, Intersport, RnR, Atmosphere, Econosports and Tech Shop, has agreed to:

• ensure that all of its future savings claims and regular selling price representations comply with the misleading advertising provisions of the Act;
  
• implement a corporate compliance program designed to ensure compliance with the Act;
  
• publish corrective notices in newspapers across Canada, in Sport Chek and Sport Mart flyers, on its corporate Web sites and its retail stores across Canada; and
  
• pay an administrative monetary penalty in the amount of $1,200,000, along with the Bureau's costs for its investigation in the amount of $500,000.

The agreement will remain in force for 10 years.

Court documents:
Re gistered Consent Agreement
PDF (2.5 MB)

News Release:
2004-07-06 - Canada's Largest Sporting Goods Retailer Pays $1.7-Million for Misleading Consumers

 

Hanson Publications Inc. (includes Associated Merchant Paper Supplies Inc, OS Networks and Copier Supply Centre Inc.)

Date: 2004-06-29
Event: Guilty Plea/Prohibition Order
Court: Ontario Court Of Justice
Court File #: 48119980410004098
Parties: Hanson Publications Inc., Associated Merchant Paper Supplies Inc., OS Networks, Copier Supply Center/Adrian Towning, Charles Hamouth, Sean Beesley, Jamie Lynes, Neil Underwood.  Note: Todd Ivison pled guilty at an earlier date.
Provisions: 52.1 (2) (a); 52.1 (2) (b); 52.1 (3) (a) of the Competition Act
Products: Business Directories (Hanson); Toner Cartridges (Copier, OS); Credit Card machine supplies ( Associated)

Summary: Hanson Publications Inc. and Associated Merchant Paper Supplies Inc. pleaded guilty and were fined a total of $50,000 for misleading hundreds of U.S. companies into believing that they were those companies’ regular supplier of business products.

Copier Supply Centre Inc. and OS Networks also pleaded guilty and were also fined a total of $50,000 for misleading hundreds of Canadian companies into believing that they were those companies’ regular supplier of business products. Adrian Towning, director of all the firms, and Charles Hamouth, director of Hanson and Associated Merchant Paper Supplies, received 10 month conditional sentences comprised of six months house arrest and four months curfew. In addition their sentence included one year probation and 75 hours community service. Company managers who received fines were; Russell Todd Ivison $20,000, Jamie Lynes $10,000; Neil Underwood $10,000; and Sean Beesley $5,000. Lynes, Underwood and Beesley were also sentenced to 50 hours community service and one year probation.

All companies and individuals received a 10-year prohibition order banning them from selling business directories, credit card paper supplies, photocopier and printer toner cartridges, or any other nondurable office supplies. The order also bans them from telemarketing any product unless they have the customer's agreement to purchase the product either in writing or in a face-to-face transaction.

Between May 1999 and September 2002, telemarketers for Hanson Publications Inc., Associated Merchant Paper Supplies Inc., and  Copier Supply Centre used false and misleading sales techniques to induce U.S. organizations to purchase business directories and credit card paper supplies, and Canadian organizations to purchase photocopier toner cartridges. The telemarketers led potential clients to believe that their organization had an established business relationship with the telemarketing firms and that products had been ordered, or that the purpose of the call was to confirm business information for accuracy or product delivery.

Hanson Publications Inc, and Associated Merchant Paper Supplies Inc. had offices in Toronto, Ontario and Montreal, Quebec. The Bureau investigation led to the laying of criminal charges in both regions under the deceptive telemarketing provisions of the Competition Act and related provisions under the Criminal Code. A preliminary inquiry before the Quebec Court is still to be scheduled for Montreal accused defendants 2951-8313 Quebec Inc., and Albert Mouyal. Additional accused Ricardo Aquino and Kristof Jausz have waived preliminary inquiry.

News Release: 
2004-06-29 - Telemarketers plead guilty to operating office supplies scam  

(167653)

Tom Taylor, Ravenshoe Services Ltd.

Date: 2004-06-08
Event: Charges
Court: Provincial Court of British Columbia
Court File Number: 138908-1
Parties: Tom Taylor, Ravenshoe Services Ltd.
Provision(s): s. 202, 206, 207 of the Criminal Code - Gaming and betting
Products: Unsolicited mailings of lottery promotions

Summary: In July 2002, charges were filed in the Ontario Court of Justice against two Vancouver corporations, Ravenshoe Services Ltd. and 483775 B.C. Ltd., and their director, Tom Taylor, as well as two Toronto corporations, HMS Direct Limited and Hallstone Products Ltd., and their director, David Stucky.  These charges relate to unsolicited deceptive mailings promoting the purchase of shares in lottery tickets, contrary to section 52 of the Competition Act.  In August 2002, all of the accused were also charged in the same Ontario court under the gaming and betting provisions of the Criminal Code (sections 202, 206 and 207).

On June 8, 2004, charges (nine counts) were filed in the Provincial Court of British Columbia against Tom Taylor and Ravenshoe Services Ltd., under the gaming and betting provisions of the Criminal Code (specifically, paragraphs 202(1)(f) and (i), 206(1)(a) and (b), and 207(3)(a).  These charges refer to one named lottery promotion, Canadian Lottery Buyers Association, and the national lotteries of Spain, Britain, France and Germany.  The Criminal Code charges previously filed in the Ontario Court of Justice against Tom Taylor, Ravenshoe Services Ltd. and all other accused have been stayed or withdrawn.  In May 2004, new Competition Act charges under s. 52 and 52(1) were filed in the Superior Court of Ontario against David Stucky, and are reported separately. 

Crompton Corporation

Date: 2004-05-28
Event: Guilty Plea
Court: Federal Court of Canada
Court File Number: T-980-04
Parties: Crompton Corporation
Provision(s): 45.(1) of the Competition Act - Conspiracy
Products: Rubber Chemicals

Summary: Crompton Corporation pleaded guilty and was sentenced to a fine of $9 million for its part in an international price fixing conspiracy in the rubber chemicals market. Rubber chemicals are chemical additives used in products such as tires, car bumpers, and rubber hoses.

The Bureau's investigation, which began in 2002, revealed that Crompton, a U.S.-based global marketer of specialty chemicals, polymer products and processing equipment, conspired with other firms in the rubber chemicals market to fix prices and share customers from mid-1995 through 2001.

Court Documents:
Indictment (PDF: 12 KB)
Agreed Statement of Fact (PDF: 20 KB)

David Stucky

Date: 2004-05-20
Event: Charges
Court: Ontario Court of Justice
Court File Number: 10829
Parties: David Stucky
Provision(s): s.52 & 52(1) of the Competition Act - False or misleading representations
Products: Unsolicited mailings of lottery promotions

Summary: In July 2002, charges were filed in the Ontario Court of Justice against two Toronto corporations, HMS Direct Limited and Hallstone Products Ltd., and their director, David Stucky, as well as two Vancouver corporations, Ravenshoe Services Ltd. and 483775 B.C. Ltd., and their director, Tom Taylor.  These charges relate to unsolicited deceptive mailings promoting the purchase of shares in lottery tickets, contrary to section 52 of the Competition Act.  In August 2002, all of the accused were also charged under the gaming and betting provisions of the Criminal Code.

On May 20, 2004, a direct indictment was filed by the Deputy Attorney General of Canada in the Superior Court of Ontario charging David Stucky with 16 Competition Act, some pre-amendment and some post-amendment (March 18, 1999) counts under sections 52(1)(a) and 52(1). Named in this direct indictment are the following three lottery promotions: Canadian Lottery Buyers Association, International Monetary Funding and International Lottery Commission, and one prize promotion, Canadian Equity Funding.  The Competition Act charges previously filed in the Ontario Court of Justice against David Stucky and all other accused have been stayed or withdrawn.  In June 2004, new Criminal Code charges were filed in the Provincial Court of British Columbia against Tom Taylor and his company, Ravenshoe Services Ltd., and are reported separately. 

 

PVI International Inc., Michael Golka, Darren Golka

Date: 2004-05-19
Event: Appeal/Cross-Appeal
Court: Federal Court of Appeal
Court File Number: A-408-02
Parties: PVI International Inc., Michael Golka, Darren Golka ("Appellants"), Commissioner of Competition ("Respondents")
Provision(s): 74.01(1)(a) of the Competition Act - "false and misleading representation"; 74.01(1)(b) of the Competition Act - "adequate and proper test"; 74.02 of the Competition Act - "representation as to reasonable test and publication of testimonials"
Product: Fuel saving device

Summary: The Federal Court of Appeal upheld a Competition Tribunal ruling which found that claims made to consumers about a fuel-saving device, known as the Platinum Vapour Injector (PVI), were false or misleading.

The Competition Tribunal decision, which was obtained in May 2002, followed a Competition Bureau investigation into allegations that PVI International Inc., and its owners Michael and Darren Golka, engaged in deceptive marketing practices about its gas-saving device.

After a full hearing, the Competition Tribunal ordered the company to stop making fuel-saving and emission-reduction claims about the PVI, and ordered the company and individuals to pay an administrative monetary penalty.

PVI's appeal of the Tribunal decision was denied by the Federal Court of Appeal. In addition, the Court also found the Tribunal erred in exercising its discretion not to order PVI to publish corrective notices.

Court Documents:
2004-05-19 - Court decision

News Release:
2004-05-26 - Misleading Gas-Saving Device Ruling Upheld

Alan Benlolo, Elliot Benlolo, Simon Benlolo, Victor Serfaty, Yellow Business Pages.com and Yellow Business Directory.com

Date: 2004-03-23 and 2004-10-01
Event: Convictions and Sentences
Court: Ontario Court of Justice
Court File Number: F871/02
Accused - individuals: Alan Benlolo, Elliot Benlolo and Simon Benlolo of Thornhill, Ontario and Victor Serfaty of Toronto, Ontario.
Provision(s): 52 (1) of the Competition Act - False or misleading representations
Product: Internet business directory

Summary: On April 23, 2004 a jury found Alan and Elliot Benlolo guilty on 10 counts under the false or misleading representations provisions of the Competition Act (Section 52). Also convicted were Victor Serfaty on eight counts and Simon Benlolo on two counts for their involvement in a Yellow Pages scam.

The individuals sent out mail pieces that falsely appeared to be bills or invoices from Bell Canada or Yellow Pages, when in fact they were solicitations to have the recipients' business details appear in Internet-based directories operating under the names Yellow Business Pages.com and Yellow Business Directory.com. Between May and December 2000, they sent the mail pieces to approximately 900,000 businesses and non-profit organizations in Canada and generated sales of over $1 million.

The Competition Bureau received more than 4,400 complaints about the phoney invoices which asked recipients to send either $25.52 or $37.40 to a postal box in Toronto.

On October 1, 2004, Madam Justice Molloy of the Ontario Superior Court sentenced Alan and Elliot Benlolo to three years in federal penitentiary and a $400,000 fine each for their involvement in the scam. Victor Serfaty received a 18-month conditional jail sentence (including six months house arrest), 100 hours of community service and a $15,000 fine. Simon Benlolo received a nine-month conditional jail sentence (including three months house arrest) and a $100,000 fine.

Court Documents:

Prohibition Order (PDF Format 4.16KB)

Reason for Decision (PDF Format 753KB)

Decision on Unreasonable Delay Under the Charter (PDF Format 898KB)

Ruling on Solicitor-Client Privilege (PDF Format 1.1MB)