Directories Reveal Yellow Streak, Decline Comment On False Ad Suit

by Larry Dobrow, Jan 25, 2004, 12:00 AM

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A day after Verizon Directories unveiled a lawsuit making false advertising claims against fellow industry heavyweight Yellow Book USA, the Yellow Pages business closed ranks, portraying the skirmish as little more than an isolated incident--that is, when its top voices deigned to speak at all.

The Yellow Pages Integrated Media Association (YPIMA), the industry's largest trade group, said it does not comment on lawsuits by its members. Other directory suppliers either gave a terse "no comment" or issued carefully worded statements that did little more than laud the industry's recent successes. Even Yellow Book respectfully declined to make its execs available for interviews, although its blurb had considerably more teeth than what one might expect ("We reject the assertions in Verizon's public statement today and recognize this lawsuit as the type of tactic Verizon is willing to use to protect its eroding base. Perhaps Verizon feels threatened").

What Yellow Pages pros were willing to discuss, however, was Verizon's claim that Yellow Book has been instructing its sales force to "use erroneous statistics in selling Yellow Pages advertising." Nearly every person who was contacted, even those who otherwise declined to speak about the lawsuit, went out of his or her way to say that if this indeed took place, such a practice would be extremely out of character for the industry.

Dex Media, which publishes 270 directories in 14 Western and Midwestern states, issued a statement through spokesperson Pat Nichols. "At Dex Media, we're advocates for fair business practices and fair competition," she said. "We go to great lengths to ensure that our statistics and data are accurate and truly reflect market realities, and we expect our competitors to do the same."

One Yellow Pages marketer was more blunt: "I'm not sure what Verizon is talking about with that [the claim that erroneous statistics were used to sell ads]. It feels like a pissing match to me."

Yellow Pages analyst and researcher The Kelsey Group, on the other hand, said that whatever occurred between Verizon and Yellow Book may merely be an outgrowth of heightened industry competition. "The Yellow Pages industry in the U.S. has become much more competitive over the past few years, with most large cities contested by two or sometimes three or more large, well-funded, and determined competitors," wrote vice president and program director Charles Laughlin in response to emailed questions. "As the industry has become more competitive, the intensity of the competition has increased as well. This action is symptomatic of that intensity."

As for the lawsuit, Verizon is alleging that Yellow Book's television ads falsely claim that more people use its directories than Verizon's SuperPages books. Although Verizon didn't disclose the amount of damages it is after, the lawsuit calls for Yellow Book to retract and correct the ads. The lawsuit, which includes both federal and state claims, was filed in the U.S. District Court for the Eastern District of New York.

Reached late last week, Lester Chu, Verizon Directories vice president, marketing and strategic planning, said that Yellow Book's actions left the company no other option than to seek legal recourse. "[Yellow Book] has a longtime habit of playing loose with the facts," he claimed. "That's the way they've always operated. In this case, we said 'enough is enough.'"

As for Yellow Book's barbs in its statement, Chu responded, "We have nothing against competition. Competition is great--let the winners win and let advertisers get the best value. But when you have to contend with this sort of marketing campaign, you have to put your foot down."

Although final figures are not yet available, it's likely that the directory business eclipsed the $15 billion mark in 2003. Verizon Information Services generated around $4.3 billion in revenue last year, while Yellow Group reported sales of more than $785 million. In 2002, more money was spent on directory advertising than on cable television, the Internet, or magazines. This statement will almost certainly hold true for 2003 as well.

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