Who: Oldham Metropolitan Borough Council, Worldwide Marketing Solutions Limited, Danny Kay
Where: High Court, Manchester District Registry
When: 11 June 2014
Law stated as at: 7 July 2014
Worldwide Marketing Solutions Limited (“WMSL”) is a business-to-business telesales company based in the north west, for whom the sole director and shareholder is a Mr Danny Kay. Mr Kay and WMSL were, in June 2014, in the Manchester District Registry of the High Court before Mr Justice Phillips in a hearing to decide whether Oldham Trading Standards were able to obtain an injunction preventing both him and his company from continuing to market Search Engine Optimisation services to businesses in a misleading and illegal fashion.
So what had WMSL been doing?
WMSL, originally based in Oldham, had, since June 2010 reportedly generated a large volume of complaints from companies. Grounds of complaint included that WMSL had been making calls and informing businesses that it was (a) calling on behalf of Google; (b) that it was affiliated with Google; (c) that it could guarantee a place on the first page of search results on Google; (d) that customers could cancel monthly fees without notice and (d) that the monthly fee was a full month’s worth of advertising. All of which sound great, but unfortunately none of which were true.
Also in 2010, Oldham Trading Standards, which, as with all Trading Standards offices, is an arm of Oldham Metropolitan Borough Council, began investigating WMSL, as both WMSL and Mr Kay were resident in Oldham.
Undertakings and laptop-takings
Following the initial action by Oldham Trading Standards, Mr Kay provided a broad undertaking to Oldham Council to desist from misleading advertising and a contractual undertaking to Google in October 2010 (on his and WMSL’s behalf). The case report does not specify exactly what happened next, but by December 2011, Mr Kay found himself signing an admission to Google that he and WMSL had breached their initial contractual undertaking, and providing a further contractual undertaking to Google in December 2011 to immediately cease falsely associating WMSL with Google.
Things clearly did not improve to Oldham Council’s satisfaction in 2012, as Oldham Trading Standards obtained a warrant in February to enter WMSL’s business premises, taking away some documents and a laptop. Finally, on 18 April 2013 Oldham Council launched proceedings to obtain an injunction to prevent WMSL and Mr Kay from continuing to breach the Business (Protection from Misleading Marketing) Regulations 2008 (the “Regulations“).
The “A62 defence”
Although Mr Kay had served a witness statement on his and WMSL’s behalf denying the alleged breaches of the Regulations, the defendants’ barrister announced at the start of the trial that the defendants would not contest the injunction proceedings on the merits, an effective admission of breaches of the Regulations.
Instead the defendants sought to have the injunction refused as the Council had no power to bring the proceedings. The argument ran as follows. Before proceedings had been served, WMSL had apparently relocated, from Oldham to Manchester (approximately 7 miles down the A62). Oldham Council was not Manchester Council, argued WMSL. Councils’ power to bring legal proceedings stems from section 222(1) of the Local Government Act 1972. They may only do so “if expedient for the promotion or protection of the interests of the inhabitants of their area”. Oldham had not obtained delegated authority from Manchester Council. Therefore it was the wrong council to bring the case, and no injunction should be granted.
Did the new approach work?
In short, no. The judge granted an injunction, dismissing the defence that the interests of Oldham’s inhabitants were not affected by WMSL when proceedings were brought as follows:
1. Although WMSL had left Oldham before proceedings were started, it was still in breach of undertakings it had given to Oldham Council.
As a matter of policy, it would not be in the interests of Oldham’s inhabitants if the council were unable to enforce undertakings against a trader because the trader simply moved to another area before enforcement proceedings were launched. This would weaken undertakings as a remedy, and would lead to greater expense for Oldham, as the council was forced to pursue proceedings instead.
2. WMSL had only moved a morning’s stroll away from Oldham, and Mr Kay was apparently still resident in Oldham, so there was a “real risk” that WMSL would return to the Oldham area in the foreseeable future.
3. The Council had produced four complaints from Oldham based businesses. Although WMSL’s sales business was national, it was likely that its telesales would include calls to businesses in Oldham.
Oldham Council had argued that the injunction should be EU-wide. WMSL’s counsel attempted to limit the damage by arguing that the injunction should be limited to the Oldham area. Mr Justice Phillips split the difference by granting a national injunction (the Judge was unconvinced that the case merited the unusual step of an injunction restraining Kay and WMSL’s activities outside the jurisdiction of the English courts).
Why this matters:
So, other than that moving down the road was not a loophole that was open to WMSL, what have we learned from this case?
Given the amount of legislation in circulation protecting consumers, B2C companies need to be particularly careful that their marketing is not misleading. However this does not give advertisers carte blanche to engage in flagrantly misleading marketing practices when selling to businesses (B2B). The relevant Regulations are enforced, and businesses should be aware that flouting them can lead to serious penalties. Following this judgment, if WMSL continue to engage in misleading marketing anywhere in England and Wales, it and Mr Kay could face criminal prosecution for contempt of court.