The Australian Competition and Consumer Commission has warned SMEs to "be careful" in their interactions with business listing directories, following a Federal Court ruling against online business directory company Australialink.
The Federal Court has banned Australialink from continuing a scam where it sent out fake invoices and threatened legal action against businesses that refused to pay up.
But misleading invoices are a common tactic used by Australian and overseas directory listings services targeting Australian businesses, ACCC deputy chairman Peter Kell told SmartCompany.
"It's a widespread practice, and it's one that we come across regularly. Unfortunately it disrupts businesses operations and it can end up costing them a lot of money.
Direct costs range from around $100 to $1,000 per invoice, Kell says. "But the indirect costs can be much larger if businesses spend money responding to legal threats."
The Federal Court has ruled against Australink's company director, Rachel Louise Dargie, and general manager, Desmond John O'Keefe, from sending out similar letters for seven years.
The company was also ordered to write to each person it invoiced during January 1, 2007 and December 3, 2008, to explain that recipients can take their own legal action against the company.
"This is a great result for small businesses that are constantly flooded with unsolicited requests to sign up for directories or advertising," Kell says.
Gold Coat based Australialink publishes several online business directories, including the Australian Business Pages Directory. It sends out more than a million directory requests to Australian businesses each year.
Between January 2006 and June 2008, Australialink solicited customers for its directory listing services with a fake legal document called a "Listing Advice Notice".
The document gave the impression recipients would be sued if they did not pay the fake invoices.
Kell says businesses that receive similar invoices from directory listings companies should watch for "red flag" tactics, such as wording that implies a product or service has already been provided.
"This is a classic tactic," he says. "It's vital that business owners and anyone who pays accounts reads any documents carefully before signing them."
Communication between employees is also vital to ensuring the alleged listing has not already been ordered, Kell says.
Businesses should also avoid giving out information on their businesses without knowing how the information will be used by listings companies, Kell warns.
Legislation slated for early next year will give the ACCC power to seek more sever penalties for companies who send misleading invoices, including fines and bans from
operating.
"We will be looking at these possibilities closely to try to stamp out the practice wherever it occurs," Kell says.
