Court Rules Yahoo Must Pay $2.7 Billion For Mexican Yellow Pages Breach Of Contract

Yahoo says it “will vigorously pursue all appeals” of a non-final judgement by a Mexico City court ruling Yahoo must pay $2.7 billion for breaching its contract with Ideas Interactivas and its parent company Worldwide Directories. The web giant seems to have had a partnership to work with Interactive Ideas to release a printed Yellow Pages of business telephone numbers for Mexico.

According to the brief press release, “The plaintiffs alleged claims of breach of contract, breach of promise, and lost profits arising from contracts related to a yellow pages listings service” but Yahoo says the claims have no merit. Yahoo filed an 8-K with the SEC regarding the ruling.

Yahoo MexicoYahoo de Mexico struck a deal with Ideas Interactivas that was announced in 2003 to create “Yahoo! Páginas Útiles” which would help people find contact info for local businesses. As of now, though, the domain is parked and doesn’t offer any Yahoo content.

The idea was to augment its online local business search with printed book. Yahoo hoped that the two-pronged strategy would let it compete with Google. The books would include maps, business and landmark listings, and a catalogue of offers and discounts. There would be flexible, low-cost advertising options in Yahoo! Páginas Útiles, which was slated for an initial circulation of 800,000 free copies followed by a second print run of 1.7 million units according to a April 2003 article from Mexican website Noticias Dot.

At some point, though, the partnership went sour.

The $2.7 billion ruling against the web portal is very steep, considering Yahoo’s total revenue was just $1.2 billion last quarter, and profit was just $226 million the quarter before. If appeals are unsuccessful, it could strike a major blow to the recovery new CEO Marissa Mayer is trying to mount. It could take months or years for the case to be finalized, and the $2.7 billion penalty could hang a dark cloud over the company’s head until then.

The scope of the contracts between the companies are not yet clear. If the deals were for Mexico alone the penalty would amount to $30 per resident. A 2005 study said there were 4.29 million businesses in Mexico, which would mean Yahoo would pay $630 each. That seems somewhat absurd, so the total Yahoo has to pay could definitely get reduced if it doesn’t beat the charges all together during appeals.

We’re waiting to hear back from Yahoo about details of the originally agreed upon partnership with Worldwide Directories and Ideas Interactivas and its statement on the initial court ruling.

Yahoo Mexico Promotions

Here’s the full press release issued by Yahoo on its company news page:

Yahoo! Inc. Reports Judgment in Lawsuit in Mexico

November 30, 2012
SUNNYVALE, Calif. — Yahoo! Inc. (NASDAQ: YHOO) today reported that the 49th Civil Court of the Federal District of Mexico City has entered a non-final judgment of U.S. $2.7 billion against Yahoo! Inc. and Yahoo de Mexico, S.A. de C.V. in a lawsuit brought by plaintiffs Worldwide Directories S.A. de C.V. and Ideas Interactivas, S.A. de C.V. Yahoo! believes the plaintiffs’ claims are without merit and will vigorously pursue all appeals. The plaintiffs alleged claims of breach of contract, breach of promise, and lost profits arising from contracts related to a yellow pages listings service.