On 30 January 2019, the Competition and Consumer Commission of Singapore (CCCS) imposed a fine of S$1,522,354 on the owners and operators of the following hotels in Singapore for engaging in anti-competitive conduct:
- Capri by Fraser Changi City Singapore (Capri)
- Village Hotel Changi and Village Hotel Katong (Village Hotels)
- Crowne Plaza Changi Airport Hotel (Crowne)
The parties were found to have exchanged commercially sensitive information in relation to the supply of their hotel rooms to corporate customers, in breach of section 34 of Singapore's Competition Act.
In particular, a sales representative of Capri was found to have exchanged commercially sensitive information with a sales representative from Village Hotels from at least 3 July 2014 to 30 June 2015, and with a different sales representative from Crowne from at least 14 January 2014 to 30 June 2015.
What constitutes commercially sensitive information
The information exchanged in this case included the following:
- Bid prices in response to corporate customers' requests for room rate quotes
- Percentage by which customers asked for prices to be dropped, and the position that each hotel would take in response
- Customers' potential room night requirements in the coming contractual period
- Customers' current and/or historical room rates and/or room night take-up
- Perceived price sensitivity of a particular customer
- Whether or not a corporate customer is a key account of the hotel
- Whether or not one hotel intends to pursue the other's corporate customer
Notably, the kind of information that could be considered commercially sensitive is potentially broad, and may extend beyond obvious categories of information like future pricing and discounts. For example, information about whether a customer is a competitor's key account was competitively sensitive as it influenced whether or not other hotels would actively compete for, and price to, the customer. Information about a customer's price sensitivity was also commercially sensitive as it influenced how other hotels receiving this information priced to the customer.
Communications over WhatsApp
Most of the communication of commercially sensitive information appears to have taken place via WhatsApp messages. Two sales representatives knew each other as they were previously ex-colleagues, and continued to remain in communication.
It is usual for employees to keep in touch with ex-colleagues in the same industry, and they may even be part of a WhatsApp group comprising individuals working for different competing establishments. While there is nothing inherently wrong with keeping in contact with people from the same industry, it is essential that businesses counsel their employees not to share commercially sensitive information with competitors.
Importantly, being part of a large WhatsApp or chat group comprising industry participants increases the risk of being involved in an illegal exchange of commercially sensitive information. As long as one participant in the chat group communicates commercially sensitive information to the group, all the other participants in the group may be liable for an anti-competitive infringement even if they may not have responded to or relied on the information. This presents obvious challenges given that it is difficult to control what others may say in WhatsApp or other chat groups. At the very least, therefore, businesses should be aware of the types of industry chat groups their employees are part of, and counsel them about the kinds of information that cannot be shared in the group and what to do if an employee does receive commercially sensitive information in a chat group.
Responsibility for acts of agents
In this case, the hotel owners had mostly left the day-to-day operations to the hotel operators they had engaged to manage and operate their hotels. Some owners had argued that they should not be liable for the conduct of their respective sales representatives as the sales representatives acted under the direction and control of the operators, and the owners were not aware of, nor sanctioned, the illegal conduct.
These arguments were rejected. The CCCS considered that the owners and their respective operators each formed a single economic entity, as the operators worked for the benefit of and carried out the instructions of their respective owners and could be regarded as an auxiliary organ of their owners. The hotel operators were agent of their owners as they did not bear any economic risk, and were not in a position to act independently in respect of the activities that they were entrusted to perform. Each single economic entity as a whole was responsible for the conduct of their respective sales representatives, and the owners, as part of the single economic entity, were also jointly and severally liable.
Accordingly, hotel owners that outsource the management and operation of their hotels to other operators should be aware that they may still be liable for any anti-competitive conduct occurring under the watch of the operators. A lack of knowledge or approval of such conduct may be insufficient to avoid liability.
Responsibility for acts of employees
Separately, some hotel owners were also directly liable for the conduct of their sales representatives as the sales representatives were employees of the hotel owners. The CCCS noted that employers were responsible for the anti-competitive conduct of employees who were acting within the scope of their employment, and it is not open for employers to escape liability by arguing that they had not instructed their employees to engage in the anti-competitive conduct.
It is worth highlighting that some jurisdictions like Hong Kong take an even stricter approach by also finding individuals personally liable for competition law infringements (see our update here for further discussion).
As this case clearly illustrated, it is rarely the case that a plea of ignorance or lack of involvement would allow businesses to escape liability for the actions of their agents and employees. It is therefore crucial for businesses to be aware of what goes on under their charge, and set clear rules about the types of conduct that are unacceptable.
Originally published 14 February 2019
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