KRK Holdings Limited and its sole director and shareholder, Koshik Kanji, were fined a total of $11,000 in the New Plymouth District Court today. They admitted making false claims that security guards would attend rural Taranaki properties if home burglar alarms were activated. They also admitted offering gifts that they told prospective customers were worth $75 while promoting the sale of the FAI Alarm systems. The real value of the gifts was not more than $30.

The Commerce Commission prosecuted the defendants under the Fair Trading Act. The Act prohibits false claims that services are of a particular kind or quality. The Act also prohibits offering gifts when promoting goods or services with the intention of not providing the gifts as offered.

KRK Holdings Limited was the area distributor of FAI Home Security packages in the Taranaki region.

The company employed telemarketers to "cold call" potential customers and offer a $75 gift of security products. To collect the gift the customer had to allow a home presentation of the FAI Home Security package.

A significant part of the FAI Home Security package was the emergency response service, "Extrawatch", being available at no extra charge for five years. The security system cost between $2,540 and $2,800 each.

If an alarm at a house with the Extrawatch service was activated, neighbours were to telephone an 0800 number and a guard from a contracted firm would be dispatched to the address.

For some rural Taranaki people this was not possible. There were no security guards contracted to cover the rural area. However, the Extrawatch service was still promoted to them and customers were told that a guard from a New Plymouth security firm would come to check their property.

Judge Harding accepted that Mr Kanji still promoted their sales in outlying rural areas despite knowing the alarms would not be responded to.

"Making false representations about products and gifts are clear breaches of the Fair Trading Act," said Commerce Commission Chief Investigator, Ross McPherson. "The Fair Trading Act is not new legislation and all traders must take care to ensure that they accurately describe the products and gifts they are promoting."

Mr McPherson said that the Commission strongly advises anyone concerned about responses to their own home security system to make two simple checks:

  • Contact the company that supplied the system and find out exactly what response there will be, and by whom, if the alarm is activated.
  • Contact the company or person who is to respond and find out how long they will take to respond and what their response will be.

FAI Home Security Holdings NZ Limited also pleaded guilty to making false claims that security guards would attend rural Taranaki properties if home burglar alarms were activated in the New Plymouth court in June last year and was fined a total of $10,000.

Media contact: Fair Trading Act Chief Investigator Ross McPherson

Phone work (04) 498 0909, cellphone 021 627 909