Bell Mobility Inc. is being sued by a group of independent dealers, who allege the wireless carrier is maximizing its own revenues and profits on the backs of franchisees.
Facing shrinking profitability margins and pressure from competing distributors of Bell products, the owners of more than 50 Bell-branded stores in Quebec and Ontario are seeking damages for business losses they allege are being caused by Bell’s policies and franchise agreements.
The suit was filed in the Ontario Superior Court of Justice on behalf of 25 Bell Canada boutique owners who are each seeking damages of $2.5-million, plus legal costs.
As part of their legal action, the dealers claim Bell is “in breach of its contractual obligations” by setting compensation programs that have rendered their stores “financially non-viable.”
“The compensation programs have and will continue to eliminate the marketability of the plaintiffs’ businesses,” says the plaintiffs’ statement of claim.
None of the allegations has been proven in court.
Bell is reserving comment on the allegations because the matter is before the courts, spokesman Mark Langton said in an e-mail, adding: “Bell fully complies with all agreements with our dealers.”
(Bell’s parent company BCE Inc. owns a 15-per-cent stake in The Globe and Mail.)
The legal action follows years of friction between the BCE wireless subsidiary and its independent dealers over the way its products and services are sold.
Cutbacks in dealer commissions and increased distribution of Bell products and services through competing channels, including Bell’s own corporate stores; national retailers such as Best Buy, Future Shop, and The Source retail outlets, which are also owned by Bell’s parent company; online and telemarketing sales, have erupted in previous rounds of litigation between Bell and its network of independent dealers.
In 2011, a settlement was reached in a suit brought against the company, in which it agreed to establish an advisory committee of dealers for the purposes of negotiating the compensation to be paid to the dealers, according to court filings. But commissions implemented in franchisee agreements since have continued to erode the profitability of Bell’s dealers, the plaintiffs claim.
“The views and positions of the dealer advisory committee have been entirely ignored, disregarded or by-passed altogether,” the suit alleges. “The said compensation programs have provided, and will continue to provide, an unreasonably low rate of return to the dealers including the plaintiffs, for the sole benefit of the defendant.”
As many as five more dealers are expected to be added to the claim before a defence is filed, said Allan Dick, a partner at Sotos LLP, the firm which is representing the Bell dealers. This will bring the total number of franchisees seeking damages to 30, representing 52 locations where mobile phones and other products and services are sold under licence in Ontario and Quebec.
In addition to about $62-million in damages, the franchisees are seeking a court injunction restraining Bell from issuing notices of default or terminating their franchise agreements.
In addition to the last round of litigation, which was settled in 2011, Bell’s independent dealers have sued the company a number of times since selling its tele-boutique stores to independent owners and franchisees in 1999, including files for damages in 2001 and 2006, which were also settled outside court.