Question:
As usual Ken, thanks for the great information you make available to the industry. I hope it is appreciated. What is the law regarding the soliciting of a subscriber of a competitor either with or without a written contract? I have seen ads offering the following: "6 free months if you switch your monitoring to us"
Harvey Cohen
Response-Ability Inc
Commack,NY
Answer:
Soliciting competitor's subscribers is a popular pass time for some alarm companies. Some owners think it unethical; others fear reprisal. Reprisal could come in more than one option, such as the other company soliciting your accounts to get even, or ahead, or a lawsuit for damages.
Soliciting another's subscribers could constitute a cause of action for inducing breach of contract or tortious interference with contract. Damages would be the loss of the value of the contract. Persistent
solicitation could also result in an action for an injunction to enjoin such solicitation and the potential for future additional damages.
Whether an alarm company suffers damages when an account is stolen away by a competitor depends on the contract with the subscriber. If the contract is written and in its original term, or properly renewed, with a term remaining, then the contract is enforceable and likely damages could
be established. Where however there is no written contract, or the term has expired or was not properly renewed, then the contract becomes terminable at will. Therefore, the loss of the subscriber could be deemed to result in no economic loss since the subscriber had the right to terminate at any time for any reason. Put another way, the alarm company had and has no reasonable expectation of continued business relation with the subscriber since there is no contract with a remaining enforceable term.
The damage issue is actually interesting because a good argument could be made that the damage suffered is not just the remaining balance of the term, but a multiple of the monthly. Say the subscriber is paying $20 a month and there is a remaining term of 10 months. One valuation would be $200. Another argument however could be that the account is worth 40 times the monthly, because that is what it could sell for in a good seller's market. That value would be $800.00.
Suing another alarm company for soliciting and stealing subscribers is not an easy suit. The subscribers you lose will not make the best witnesses on your behalf. The alarm company has the right to accept these subscribers as customers even if they are under contract with you, especially if the customer reached out the alarm company and their was no solicitation. General advertising is not likely going to be treated the same as direct marketing or contact for solicitation purposes.
I am not aware of any action against an alarm company who advertised in such a way as to induce subscribers of other alarm companies to switch, before or after their contracts are up.
If anyone has any information about such lawsuits, let me know.