A recent article on securitysales.com entitled “Alarm Companies to Pay ADT Nearly $4M for Deceptive Sales Practices” is worth noting. ADT pursued claims against two other alarm companies for damages arising out of the other companies’ sales representatives engaging in deceptive business practices, including claiming affiliation with ADT. One can hardly blame ADT for taking an aggressive posture to protect its market share. Though I suspect that ADT is all about new sales, it is not surprising that it refused to sit by and allow attrition caused by other companies’ aggressive sales techniques, including alleged deceptive practices. ADT reportedly settled for $2.2 million from one company and $1.5 from another.
I get many calls from alarm companies complaining that another firm is poaching its subscribers. What can be done about it? Unless you have deep pockets like ADT, you can’t do much. As a practical matter, not much should be done unless the poaching is pervasive, as in the ADT cases. In order to prove these cases, you generally need the cooperation of the subscribers.
When you’ve lost a handful of accounts, it may be difficult to get a subscriber to support your case. In the ADT situation, there was widespread conversion of accounts so the proof was easier to obtain. These types of cases are costly to pursue and you have to balance the economics. ADT’s rationale for pursuing its claims was to “protect consumers” and protect its “reputation”. There was no mention of ADT’s market share and recurring revenue.
To state the obvious, you’re not ADT, so you should only pursue improper competitive cases after a good deal of consideration. You may want to wait a few months before you react to the loss of an account under these circumstances so you’re not basing your decision of emotions.. On the other hand, I do not suggest taking no action if your accounts are under attack from another company.
Sometimes these issues can be resolved quickly. Probably what made this article catch my attention was that same day I read it, I got a call from a client who said his ex-salesman was stealing accounts for his new employer’s alarm firm. I wrote to the new employer, advised that the salesman was under an employment contract that restricted him from soliciting his former manager’s accounts. The new employer promptly got back to me that the salesman had not yet sold an account but that he would be instructed not to violate his agreement with his former employer. Good idea, especially since I also represent the new employer. Be sure that all of your employees have signed an employment agreement. It will help when you need it.