Online marketing agencies’ spat ends in £316,945 damages bill

Who: ReachLocal UK Limited and ReachLocal Europe B.V. (“ReachLocal”), Your Online Digital Agency Limited (“Yoda”) and others

Where: UK

When: October 2014

Law as stated at: 11 December 2014

What happened:

In a recent High Court judgment, digital marketing agency YODA and certain named individuals associated with it (the “Defendants”) were found to have published defamatory statements against US-owned online marketing service group ReachLocal via email, phone calls, their website and social media.

The judge described the Defendants as having “orchestrated a sustained campaign of denigration directed at the business of ReachLocal” which was “calculated and cynical”. It was primarily targeted at ReachLocal’s customers and “plainly designed simply to enable the Defendants to steal [ReachLocal’s] customers.”

The story started a year or so previously when ReachLocal and YODA entered into an affiliate agreement by which YODA would refer potential customers to ReachLocal. The agreement contained a non-solicitation clause which obliged YODA not during the agreement or for a period of 12 months thereafter to divert or solicit business referrals or customers away from ReachLocal.

The parties subsequently fell out and YODA’s extraordinary campaign of denigration, using a list of ReachLocal’s customers YODA should not have had, resulted in ReachLocal issuing proceedings for defamation, malicious falsehood and breach of the non-solicitation clause.

YODA failed to serve a Defence to the proceedings and ReachLocal obtained judgment in default. The judgment we report on here was given in respect of ReachLocal’s application to the court for final relief, principally in the form principally of damages to be assessed by the court. YODA did not appear at the hearing.

The judge awarded general and special damages for defamation (subject to a 20% discount as he found there to be other factors contributing to the losses) and injunctive relief. The damages, which totalled just over £444,000, were substantial and reflected loss of business, special damages arising from ReachLocal’s attempts to mitigate its losses (including customer credits and PR costs), and an award of general damages in defamation.

Why this matters:

No matter how sincerely a business may feel that it has been in some way disadvantaged by an affiliate, this case clearly shows that responding with denigratory communications to the affiliate’s customers can lead to serious and potentially ruinous consequences.

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