The Online Business Index Limited (OBI) contacted thousands of businesses in London and Manchester by mail shot, inviting them to add their details to its internet directory.
OBI gave the impression that its service was free – but then invoiced customers the sum of £845 plus VAT per year over a minimum two-year term, and used debt collection agencies to pursue those customers that refused to pay.
The company used London accommodation addresses but operated mainly from Germany. It attracted nearly 500 customers following its first mail shot campaign of 50,000 London-based businesses.
The Advertising Standards Agency investigated the company after receiving complaints over the adverts, and although it found that the mail shot was misleading, OBI continued to send out the ads.
The matter was referred on to the Department of Trade and Industry (DTI) and an investigation launched. On 21st November last year the DTI presented a petition to wind up OBI to the High Court.
This was granted and the Official Receiver has been appointed the liquidator of the company and will be responsible for investigating the circumstances of the company's failure and the conduct of its officers.
The court heard that OBI and its director, Herbert Kerler, did maintain an internet business directory, but never sought to promote and advertise the web site beyond the targeted customer base.