here are my some experiences:
I have an old AM29 freq. from KO. It is not legally accepted frequency to be used on RC in US and Canada.
my am29 worked fine in Vancouver, canada, nothing jammed it. However, it totally ran into similar situation as yours when I was in Ontario Toronto canada.
the fact is some of the frequency are being used by other type of device, I heard someone sells radio crystal which is for medical equipment
to RCer. It may work for some cities or province, but definitely it will run into problem.
Since your shop changed you an AM system and it works, the problem is grounded to the FM radio, either the crystal frequency or even the transmitter itself. It definitely has some devices jamming its frequency which is stronger and continue signal.
I suggest you ask for a refund for it.
Just my 2 cents.