Signature Security Systems Fined For Misleading Ad

Issued 30 May 2001/62

Signature Security Systems Fined $10,500 For Misleading Advertising In Yellow Pages

The Christchurch District Court today fined one of the country's biggest security firms, Signature Security Systems Limited, $10,500 for making misleading claims about the cost of its monitored alarms.

Commerce Commission Chair John Belgrave said that it is disappointing that a security firm has been convicted of breaching the Fair Trading Act.

"Security firms promote themselves as protecting personal safety, and here is Signature-a major player in the industry-breaking a law intended to protect consumers."

Judge Ryan said that the level of fine should be seen as a warning to security firms. He said that future breaches by Signature or other firms could attract much higher fines.

Mr Belgrave said that Signature did not disclose substantial additional costs in its Yellow Pages advertising. The advertisements were in Yellow Pages directories throughout the country.

Signature offered "Fully monitored alarms installed from just $295* plus GST". In small print at the bottom of the advertisements was "*conditions apply".

However, the total cost was $2,095, being the $295 installation fee plus $30 a month for a compulsory five-year contract. The additional $1,800 cost of the contract was not disclosed in the advertisements.

Also, customers did not buy the alarms, they leased them. Throughout the contract, and at its end, the alarm and other hardware installed remained the property of Signature.

Mr Belgrave said that all advertisers must take particular care when using long-term media like the Yellow Pages because advertisements are there for a long time before they can be changed.

"It is not like daily media where changes can be made or corrective advertising published quickly. False or misleading ads in the Yellow Pages are there for a year.

"That is a long time in which to upset consumers and competitors, both of whom can take their own legal action or make complaints to the Commission."

Background

The Fair Trading Act prohibits conduct liable to mislead the public as to the nature or characteristics of goods (section 10).

The Act also prohibits false or misleading representations about the price of goods or services (section 13(g)).

Ends

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