Hospitality…illegal or just doing business?

Hospitality FMI Brand Engagement Agency

Inviting buyers to a social or sporting event to talk business and perhaps to say thanks for doing a few good deals recently seems innocent enough, doesn’t it? Why should anyone object to being courteous and developing a mutually beneficial relationship? Where’s the harm in a few drinks with a potential buyer?

There have been a number of pronouncements in recent months by hospitality ticket agencies that things are looking up. After a few lean years, it’s business as usual for many hospitality providers. With business actually down by 30% since 2010 in volume terms it may be a little too early for them to be opening the bubbly stuff right now. Corporate buyers need to be treated with care because things have changed.

As a general rule business has still not understood what was wrong with hosting buyers to ‘free lunches’ and many are struggling to come to terms with potential prosecution and a prison term for violating the legislation enshrined in various very recent, national anti-corruption laws.

So, what is the actual problem?

Basically, it’s all about bribery and the tendency for such largesse to be perceived as an incentive for objective procurers to make subjective judgements about which supplier to use. That is illegal. For both the provider of the hospitality and the receiver.

But it’s not as clear-cut as everyone would like it to be. For a start, is there a lower limit where general business courtesy could be deemed to be okay when it comes to bribery? If a meal costs $15, £15 or 15e, is that acceptable? Or can you spend up to one hundred per head and still be under the threshold?

The law in most countries does not state what the amount should be; it simply asks the offeror and the recipient the question…could your decision in the business relationship be affected by this benefit? If so, this is illegal. What the legislators were trying to avoid is business people spending up to the prescribed limit, say ninety-nine if the limit is one hundred, but just doing it multiple times.

The most difficult thing in the hospitality business is determining when, for example, a show-round/lunch or a complimentary overnight at your hotel becomes a bribe. Our product is hospitality itself, so surely we can demonstrate our product without fear of prosecution?

Not so. The law will determine if the offer of free hospitality is appropriate for the situation as judged by ordinary local people, who may be sitting on a jury. If you regularly host senior corporate directors at your upmarket hotel and entertain them for three days for free under the guise of ‘demonstrating the product’ you may find that a local jury member at your trial would consider this very much over-the-top and not an appropriate use of shareholder funds.

What about travel destinations?

Destinations need to be very careful too that their ‘fam trips’ to exotic locations are not seen by the law as a direct attempt to get clients to switch their budget to your property by means of personal offers to individuals who normally are not paid very much. He or she just happens to be the event executive whose job it is to choose and book the venue.

An often heard defence is that ‘in their country’ this type of hospitality is normal and would only ever be viewed as good salesmanship. The Courts in say the USA China or the UK would see it as profligate and corrupting. The recipient would be prosecuted in their own country, even if the provider was deemed to be innocent locally.

Many senior business people in major organizations have now adopted a new approach to any hospitality offered. They pay for it themselves…even a lunch…to avoid any potential criticism that they may be open to bribery, however subtle. They will all have well-publicized internal bribery and corruption policies for the misuse of shareholder funds, however minor you may think they may be. As one lawyer put it to me, when it comes to corruption or bribery you cannot be half pregnant.

Conclusion

Until there is global agreement in business as to the difference between friendly hospitality and insidious bribery, this will remain a grey area for both the giver and the receiver.

Especially when hospitality is our business.

To find out how FMI can help with your next hospitality event get in touch

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