A group of Bell Mobility Inc.'s independent dealers have expanded a lawsuit against the company, with more dealers joining the claim alleging the Canadian telecommunications firm unfairly clawed back their compensation.
More than 30 plaintiffs – who together own about 110 Bell-branded stores primarily in Ontario and Quebec, acting as exclusive retailers for Bell wireless devices and services as well as home phone and Internet – are now each seeking damages of $2.5-million, plus legal costs.
One of the new plaintiffs is Toronto-based Worldlynx Wireless LP, which operates 64 Bell stores in Ontario, British Columbia, Alberta, New Brunswick and Newfoundland and also sells business-to-business services for Bell in Quebec.
The claim, which was filed in the Ontario Superior Court of Justice in Toronto in June, 2013, was transferred to a division of the court that handles complex commercial litigation in July, 2014. The litigation is now in the discovery phase, which involves the parties' lawyers examining witnesses for both sides.
For more than a decade, Bell has frequently been at odds with its network of dealers, some of whom have filed legal actions complaining the company has lowered their commissions and favoured other retail channels.
Bell also sells its mobile devices and communications services on its website and through retailers such as Best Buy. In 2009, it bought electronics chain The Source, which only sells Bell's wireless products, and earlier this year, it acquired 50 per cent of Glentel Inc., which operates close to 500 retail locations in Canada under names such as Wirelesswave and Tbooth Wireless and solely sells Bell, Rogers and SaskTel wireless products.
Bell and its dealers settled a previous case seeking more than $200-million in damages in 2011 but trouble resurfaced shortly after that.
In the current claim, the plaintiffs claim the compensation programs Bell set for 2012 and later are "in breach of its franchise agreement[s]" with the dealers. The claim argues the compensation programs provide "an unreasonably low rate of return" to the dealers for the "sole benefit" of Bell.
The dealers argue in an amended statement of claim that owning and operating a dealership requires a significant investment – estimating the average initial cost to open "an average franchised Bell Mobility store" at $500,000 and arguing they incur a number of fixed ongoing costs such as rent and salaries.
"The viability of each Bell Mobility dealer … is fundamentally dependent on its ability to earn revenues from the commission structure set by [Bell]," reads the claim.
In a statement of defence, Bell denies the allegations and argues the compensation agreements "represent rational business decisions made by Bell Mobility for valid economic and strategic reasons, including market and industry-specific reasons, reasons of competitiveness and the business performance of the parties."
The company states that it did consider "the legitimate interests of its independent dealers … and acted at all times in good faith," and argues that nothing in its agreements with the dealers, "or at law, requires Bell Mobility to consider the profitability of each individual dealer's business."
Bell also states that at no time during previous negotiations with the dealers did it make any guarantee or promise "to any of the plaintiffs that related to the future profitability or success of any individual dealer."
In a reply filing, the plaintiffs argue "profitability is the essence of the reason a dealer enters into a dealer agreement. Although not guaranteed by the defendant, the defendant must take into account the dealer's reasonable expectations for profit in the context of the franchised business and investments made by the dealers in their businesses in setting compensation."
Mark Langton, a spokesman for Bell, declined to comment on the matter on Friday and Allan Dick, the plaintiffs' lawyer, did not respond to requests for comment.
None of the allegations have been proven in court.