MONTREAL – A group of independent franchise owners, who represent a significant number of operators of Bell retail stores in Quebec and Ontario, launched a massive lawsuit against the communications giant in Quebec this week.
The suit claims damages for at least $135 million over Bell’s refusal to let the owners transfer their stores to an income trust, effectively blocking the owners from deciding what they can do with their own stores.
The suit was launched by members of the Independent Communications Dealer Association of Canada (ICDAC), representing a total of 79 Bell World, Espace Bell, Bell Mobility and Bell Mobilité stores in Ontario and Quebec, says the press release. They sell all Bell products to consumers and small business owners from ExpressVu to local phone service.
There are approximately 288 stores in the two provinces, of which nearly 75% are owned by independent operators.
"After more than a year of negotiations and due diligence, and assuring us that they were supportive, Bell shocked us all in mid-January by deciding not to proceed with this unique growth and investment opportunity," said Scott Phelan, president of ICDAC. "But they are also refusing to allow us to proceed on our own, handcuffing us, and this is totally contrary to our rights, and to fair business practices."
At a Montreal news conference Tuesday, Phelan said there were three parties involved in the now-dead negotiations: Bell Distribution Inc. ("BDI" — the retail division of Bell Canada); a majority of members of ICDAC; and Wireless Distribution Income Fund ("WDIF"), a group of capital investors with extensive income trust and wireless distribution experience, who brought the proposal forward to the two sides in late 2004 – early 2005.
BDI’s initial reaction was to turn down the proposal, but the company changed its decision in April 2005, once they recognized the proposal’s merits following discussions with ICDAC and WDIF, says the ICDAC. Several months of study followed and preparation for transferring all stores in Quebec and Ontario – including Bell’s corporately-owned stores – into the trust. With formal agreement days away, in September, the federal government announced a freeze on new income trusts.
When the government freeze was lifted in November 2005, ICDAC and WDIF expected an immediate confirmation from BDI. But it didn’t happen. And then, after two more months of delays by Bell, BDI informed the two other parties in January that it was pulling out of the deal, and also refusing to allow the independents to go ahead unilaterally, says the ICDAC.
"Bell has lost a major opportunity that would have benefited every stakeholder involved – including current and future consumers of Bell products and services both in Quebec and Ontario," said Phelan. "In a recent letter to shareholders, Bell Canada CEO Michael Sabia stated that the company’s strategy going forward will be to ‘unlock value for shareholders and to focus Bell on its core business of telecommunications’. Well, back here in the world of Bell retail, we’re completely locked up, and we seem to be out of that focus. We’re back to square one. In fact, it’s worse than square one."
Phelan said the income trust would have provided greater investment capital to improve management and operating systems, and therefore better customer service.
The $135 million damages being sought by the ICDAC members is a calculation of the losses sustained by the dealers, as a result of Bell’s refusal to allow the stores to be transferred to the income trust.
"We are angry about the time Bell has wasted and the money we have lost on this," said Phelan. "We are appalled at the lack of vision and the unfairness of their decision. We are confident of our position, and we are determined to win this lawsuit."
