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 media during 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 in question and found that their practices were infringing Section 34 of the Competition Act, and subsequently raided them in June 2015.
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 pf 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 on,” he said of the decision, adding that sales representatives should be more aware that information sharing for certain situations “can be an issue”.
