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Capri, Village Hotels and Crowne Plaza Changi fined S$1.5 million for anti-competitive behaviour

SINGAPORE — Four hotels clustered around the Eastern part of Singapore have been fined a total of S$1,522,354 for anti-competitive conduct during contract negotiations with corporate customers such as Standard Chartered Bank and Swire Pacific.

Capri, Village Hotels and Crowne Plaza Changi fined S$1.5 million for anti-competitive behaviour

Capri by Fraser Changi City incurred the heaviest fines out of the four hotels, totalling S$1,010,451.

SINGAPORE — Four hotels clustered around the Eastern part of Singapore have been fined a total of S$1,522,354 for anti-competitive conduct during contract negotiations with corporate customers such as Standard Chartered Bank and Swire Pacific.

The Competition and Consumer Commission of Singapore (CCCS) said on Wednesday (Jan 30) that sales representatives from the four hotels exchanged commercially sensitive information about these corporate customers in 2014 and 2015.

Of the four hotels, Capri by Fraser Changi City Singapore incurred the heaviest fines totalling S$1,010,451, while two Village Hotels were fined S$286,610 in total. The fourth hotel, Crowne Plaza Airport Hotel, was fined S$225,293.

The malpractice started on Jan 14, 2014, involving sales representatives of Capri and Crowne Plaza, CCCS said at a media briefing.

The second infringement which started on July 3, 2014, involved the sales representatives of Capri and Village Hotels.

In both cases, sales representatives from the four hotels exchanged commercially sensitive information about their corporate customers up to June 30, 2015, when CCCS officers raided the hotels.

The information included bid prices by the hotels for corporate contracts and the corporate customers' projected room requirements.

For example, a WhatsApp screenshot showed the sales representatives from Village Hotels and Capri discussing their discount negotiations with Standard Chartered Bank.

 

WhatsApp chat between Capri and Village Hotels reps. Source: CCCS
WhatsApp chat between Capri and Village Hotels reps. Source: CCCS

In another conversation, the same Capri sales representative and his counterpart from Crowne Plaza talked about maintaining their room prices above a competitor's so as not to be dragged into a price war.

WhatsApp chat between Capri and Crowne Plaza reps. Source: CCCS
WhatsApp chat between Capri and Crowne Plaza reps. Source: CCCS

Inter-Continental Hotels (Singapore), which manages and operates Crowne Plaza, told TODAY that the errant sales representative is no longer with the company, while Village Hotel's Far East Hospitality has counselled its sales staff.

"When we were notified of CCCS’ investigation in mid-2015, we took immediate steps to ensure the sales team member stopped sharing non-public information," Mr Arthur Kiong, CEO of Far East Hospitality, told TODAY.

Both companies said that their employees are required to undergo training and briefings on ethics and compliance, which include anti-competition laws.

Frasers Hospitality, the operator of Capri Changi, said it is disappointed but respects the decision by CCCS.

"Frasers Hospitality does not condone anti-competitive conduct and continues to take a serious view against it," the operator said. "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."

Unlike non-corporate customers who are offered public rates, corporate customers usually have a list of preferred hotels to meet their business needs.

These contracts are negotiated between these companies and the hotels, so they can get preferential rates for a fixed term based on factors such as the number of rooms needed for the year and historical prices.

CCCS Chief Executive Toh Han Li said: “The exchange of non-public commercially sensitive information between competitors is harmful to competition and customers in the market as it reduces the competitive pressures faced by competitors in determining their commercial decisions, including the price they will offer to customers."

"This can result in customers having less competitive prices and options after such exchanges," he added.

Over 30 hotels were initially investigated by the CCCS for anti-competitive conduct, but the scope later narrowed to the four hotels.

WhatsApp chat logs were seized by CCCS during unannounced inspections of various hotel premises on June 30, 2015.

Mr Toh said: "(The investigations) were initiated based on our internal intelligence and surveillance, but eventually, the number of hotels was narrowed to these (four)."

"Some of the information we looked at from the other hotels showed harmless chatter which didn't affect the pricing of corporate customers," he added.

THE PARTIES INVOLVED

Each hotel has an owner and operator. Typically, the hotel owner pays a management fee to the operator to run the hotel and is not involved in the day-to-day operations.

  • Capri by Fraser Changi City Singapore

Ascendas Frasers was the owner of Capri until March 30, 2015.

Frasers Hospitality Trustee took over as the owner of Capri from March 31, 2015.

Frasers Hospitality was the agent for the management and operation of Capri.

As there were two owners during the period of the offences, Capri was fined twice. The first fine for Ascendas Frasers and Frasers Hospitality involved S$793,925, while the second fine for Frasers Hospitality Trustee and Frasers Hospitality was S$216,526.

  • Village Hotel Changi and Village Hotel Katong

Far East Organization Centre is the owner of Village Hotel Changi.

Orchard Mall owns Village Hotel Katong.

Far East Hospitality Management is the appointed agent for both hotels.

The two Village Hotels were fined S$286,610 after the owners and agent applied for leniency on April 18, 2016.

  • Crowne Plaza Changi Airport Hotel

OUE Airport Hotel is the owner/master lessee of Crowne Plaza.

Inter-Continental Hotels (Singapore) manages and operates Crowne Plaza.

OUE Airport Hotel applied for leniency on July 21, 2015, and was fined S$225,293, together with Inter-Continental Hotels (Singapore).

Under the Competition Act, financial penalties are capped at 10 per cent of the offender's total turnover. In this case, one of the hotels was fined the statutory maximum, CCCS said. The anti-competition watchdog declined to name the hotel.

CCCS has a leniency programme for businesses that volunteer information on their cartel activities, with a reduction or waiver of fines when eligible.

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