Skip to main content

Advertisement

Advertisement

Singapore

4 hotels fined S$1.5m for exchanging commercially sensitive data: Competition watchdog

The four hotels involved are Capri by Fraser Changi City Singapore, Village Hotel Changi, Village Hotel Katong and Crowne Plaza Changi Airport Hotel.

4 hotels fined S$1.5m for exchanging commercially sensitive data: Competition watchdog

From top left: Capri by Fraser Changi City Singapore, Village Hotel Katong, Village Hotel Changi and Crowne Plaza Changi Airport Hotel.

SINGAPORE: Sales representatives from four hotels in Singapore shared commercially sensitive information of their corporate customers for a year and more, thereby causing “serious harm to competition” in the industry.

For such practices, the Competition and Consumer Commission of Singapore (CCCS) said on Wednesday (Jan 30) that it had imposed infringement penalties of more than S$1.5 million in total on the hotels. 

These are Capri by Fraser Changi City Singapore, Village Hotel Changi, Village Hotel Katong and Crowne Plaza Changi Airport Hotel, according to its press release.

CCCS chief executive Toh Han Li told the media in a briefing the same day that the investigation into hotels sharing sensitive information was initiated internally, and initially covered more than 30 hotels.

Over time, however, the competition watchdog found that most of the hotel employees’ interactions were just casual chatter, he added.

They did zoom in on the four hotels and conducted raids as part of its investigations in 2015, before narrowing the focus to the two infringements cited here in June 2016.

Through their investigations, CCCS found that sales representatives of the hotels exchanged information that is “likely to have influenced each other’s future conduct on the market or have placed them in a position of advantage over their customers in contract negotiations”.

The common industry practice was for corporate clients to establish a list of preferred hotels to get preferential rates and on fixed terms of, say, a year. Hotels on their end would compete to be on the preferred hotels list, then vie for actual room bookings throughout the contract term, the agency explained.

“SERIOUS HARM TO COMPETITION”

However, the sales representatives from the four hotels shared information that placed them in a beneficial position when negotiating with these corporate clients.

For instance, sales representatives from Capri and Village Hotel had shared the contract renegotiation details between a common corporate customer in Standard Chartered Bank, CCCS revealed.

According to a Nov 3, 2014, WhatsApp chat log the watchdog had obtained, a Village Hotel representative asked the Capri counterpart: “Can check with u how many percent is SCB renegotiating from your offered rate?”

In response, the Capri representative said: “All I can tell u that they are requesting rates lower than this year”

“Same here”

“He ask for (redacted) % reduction”

“u can tell me in percent or not”

“Same la”

(Source: Competition and Consumer Commission Singapore)
(Source: Competition and Consumer Commission Singapore)

CCCS said the sales representatives tend to interact frequently, especially during periods when customers looked to contract or re-contract with hotels. The two infringements it identified involved Capri and Village Hotels from Jul 3, 2014 to Jun 30, 2015 and Capri and Crowne Plaza from Jan 14, 2014 to Jun 30, 2015.

“Both were, by their nature, injurious to the proper functioning of normal competition and had caused serious harm to competition in Singapore,” the watchdog said.

“Without (the contact), each sales representative would have had to determine their conduct on the market independently. This would have likely resulted in more competitive rates and/or terms offered to corporate customers.”

As a result, CCCS imposed financial penalties on both the owner and operator of the four hotels, with Capri getting the brunt of these. The breakdown of the penalties are:

CAPRI - S$793,925

Ascendas Frasers, owner until Mar 30, 2015

Frasers Hospitality, agent for hotel management and operation

CAPRI - S$216,526

Frasers Hospitality Trustee, owner from Mar 31, 2015

Frasers Hospitality

VILLAGE HOTELS - S$286,610

Far East Organization Centre, owner of Village Hotel Changi

Orchard Mall, owner of Village Hotel Katong

Far East Hospitality Management, agent for management and operation of hotels

CROWNE PLAZA - S$225,293

OUE Airport Hotel, owner

Inter-Continental Hotels (Singapore), agent for hotel management and operation

CCCS noted that in imposing the penalties, it took into account, among other factors, whether companies had applied for its Leniency Programme which incentivises companies participating in secret cartel activities to come forward.

OUE Airport Hotel applied for leniency on Jul 21, 2015, while the owners and agent for Village Hotels did likewise on Apr 18, 2016, it said. Capri did not apply.

Mr Toh said that this is not the first time CCCS took action against companies sharing commercially sensitive information, but this latest decision is the first for the hotel industry.

“We wanted to signal that certain types of (business) practices are not ok,” he said of the decision, adding that sales representatives should be more aware that information sharing for certain situations “can be an issue”.

Meanwhile, the Singapore Hotel Association (SHA) said it was “concerned” about the outcome. 

“In our industry, it is common practice for owners to appoint operators to manage the day-to-day operations of their hotels. Therefore, for the owners to be liable in this case is certainly a cause for worry,” said SHA executive director Margaret Heng.

“As an Association, we will continue to organise more workshops in this area to help members understand the Competition Act better so that they will not inadvertently violate the law.”

ONE EMPLOYEE FROM FAR EAST INVOLVED 

In response to queries from Channel NewsAsia, Far East Hospitality acknowledged that one of its sales team members was involved in the infringements. 

"Pursuant to its investigation, CCCS has concluded that at the time of the relevant infringing conduct, one team member was found to be involved," said CEO of Far East Hospitality Mr Arthur Kiong. 

When the company was notified of the investigation in mid-2015, it took immediate steps to ensure the sales team member stopped sharing non-public information, said Mr Kiong. 

The employee was also counselled, he added. 

"Various steps were taken to review and implement rigorous compliance and training programmes to ensure that our business practices continue to be fully compliant with all applicable laws. " 

He also added that though the group was disappointed with the infringement decision, it respected the position taken by CCCS. 

In a statement, Far East Orchard said that it had made "robust submissions" through its lawyers in response to the proposed infringement decision, which was issued on Aug 2. 

"The group takes legal compliance very seriously and will continue to focus on growing its business in a principled and ethical manner with strict adherence to all applicable laws," said the company. 

It added that it will continue to routinely review and implement robust compliance and training programmes to ensure that its business practices continue to be fully compliant with all applicable laws.

The company also said that it did not expect the penalty to "have any material impact" on the net tangible assets and earnings per share of the group for the current financial year which ends on Dec 31.

EMPLOYEE NO LONGER WITH CROWNE PLAZA

Meanwhile, Crowne Plaza Changi Airport Hotel said that one employee who was involved with the infringements is no longer with the company. 

“We focus on doing business responsibility and operating with integrity. We do not condone the behaviour that was highlighted in the CCCS findings," it said.

"All hotel colleagues globally are required to complete e-learning training on ethics and compliance which includes anti-competition laws."

Frasers Hospitality, which operates Capri Changi, also said it does not condone anti-competitive conduct and holds serious views against it.

"As part of its ongoing efforts to strengthen its compliance standards, Frasers Hospitality will be providing even more rigorous training to its employees to ensure that its business practices are and continue to be compliant with all applicable laws," the firm said.

It added that the penalty levied under CCCS' decision is not expected to have a material impact on its finances.

Source: CNA/mn/ec

Advertisement

Also worth reading

Advertisement