Security Firm Fined $4,000 For “Free Alarms” Offer

Invercargill Security Firm Fined $4,000 For “Free Alarms” Offer

Demand Boss Security was fined a total of $4,000 in the Christchurch District Court on Monday. It admitted making claims that members of the public could obtain free alarms, without disclosing that in order to do so a customer had to take a monitoring service for a three year term at a daily cost of $1 + GST. The claims were made in an advertisement in the Southland Times in April.

The Commerce Commission prosecuted the defendants under the Fair Trading Act. The Act prohibits conduct liable to mislead the public as to the nature or characteristics of goods as well as false or misleading representations about the price of goods or services.

Commerce Commission Director of Fair Trading Deborah Battell said that misleading advertising by security firms has been a surveillance target for the Commission over the last year. The surveillance has resulted in 18 warnings as well as the recent successful prosecution of Signature Security.

“The Commission has received a large number of complaints from firms in the industry,” said Ms Battell. “The alarm market is very competitive. The advertising of cheap or free alarms plus monitoring contracts has become common practice. While complying traders offer deals in ways that are not misleading, Demand Boss’s advertising was likely to attract business on the basis that the hooks would be explained later. This is not fair to businesses which advertise in an up front manner.”

“Nor is it fair to consumers. Alarms sold in this way are never really ‘free’ – consumers end up paying for them one way or another. Traders shouldn’t try and hide costs from their customers. It is not only deceptive, but makes it difficult for consumers to compare offers.”

Ms Battell said the Commission is aware that consumers are still having problems with the industry. “We will continue to prosecute those traders who behave in this manner.”

Background
In May 2001, the Christchurch District Court 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.

Signature did not disclose substantial additional costs in its Yellow Pages advertising. It 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.

Commission media releases can be viewed on its web site www.comcom.govt.nz

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