November 4, 2011
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Question
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Ken,
Here in Illinois we are experiencing a mandated take over of fire alarm monitoring and service by various cities. They are installing a mesh radio network that only a few companies are allowed to bid on due to the requirements by the cities and by the manufacture of required equipment. The customer who we have a contract with is required by city ordinance to change monitoring services and contract with the city approved company. At this point can we enforce our early termination charges ( which I feel is unfair to the customer) or any recourse to make the city wait in enforcing the change over until our contract expires as much as we want to take care of our client ,a 45 unit apartment complex, it appears we are being forced out of the service and monitoring business in this city This is also a considerable loss of revenue to us
Dennis Monas
Innovative Security & Technology Inc.
Roselle Illinois
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Answer
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This sounds a like like the case ADT had against the fire district, also in Illinois, which was reported in SDM [see: http://www.sdmmag.com/articles/86791-illinois-court-sides-with-adt-against-fire-district-monitoring-monopolies]. The article reports:
"A federal court decided last week that a fire protection district in Illinois had no legal authority to establish its own non-competitive monitoring station and take over more than 300 accounts from private companies, including ADT and Alarm Detection Systems (ADS). The court's decision has permanently banned the District from entering the fire monitoring business. However, according to a report in the Northwest Herald, the municipalities have taken this ruling as confirmation that they, as bound by different legislation than the fire district, do have the authority to dictate the 'who' and 'how' of fire alarm monitoring. IESA members worry that notion could spread to other states like poorly monitored wildfire."
I don't see how the municipality can decide to compete against you and void your outstanding contracts. I agree that it's not the customer's fault. Another case is reported on my web site at
http://www.kirschenbaumesq.com/illinois4.htm
Competition from municipalities is only going to increase and the industry needs to be diligent about resisting it.
In your question its not competition by the municipality, but by hand picked private companies. I think that all companies have to have the right to qualify for bidding, and unless there is some real reason for the selection of equipment limiting those entitled to sell and service that equipment, the action by the municipality does not serve to foster competition in a free market. I doubt you can prevail against your subscribers on the remaining term of the contract; they didn't breach. You can no longer provide the service.