Author: Claire Weekes
The Bribery Act will soon become part of UK law and businesses will need to watch their backs when it comes to corporate hospitality and gift giving. Claire Weekes investigates the implications for marketers
On 31 January 2011 the Ministry of Justice announced a delay “pending further review” to the introduction of the much anticipated Bribery Act, which was due to come into force in April 2011. News of the delay has been met with a mixture of relief and frustration, particularly among companies who have worked hard to look into the implications of the Act on corporate life. The question coming up time and again in marketing circles is what impact the Act might have on the future of corporate hospitality and gift giving – both common practices in B2B marketing.
The origins of the new Act
Rushed into law as part of the wash-up conducted by Labour just before the 2010 election, the Bribery Act is – on the whole – Britain’s part in adhering to the rules of the Organisation for Economic Co-operation and Development’s (OECD) Convention, which it signed up to in 1997. All 38 countries that signed up are required to put in place legislation that criminalises the act of bribing a foreign public official.
But the Act itself goes beyond penalising just foreign bribery. It will also penalise the offering, promising or giving of an advantage – and requesting, agreeing to receive or accepting of an advantage – as well as failure by an organisation to prevent bribery.
In terms of penalties, the maximum jail term for an individual seen to commit an act of bribery will raise from seven to 10 years, and a company caught in the act can receive an unlimited fine.
Hostility towards hospitality?
Worries over the effect the Act may have on the corporate hospitality industry are rife. On 14 January such concerns prompted the Deputy Lords opposition chief whip Lord Tunnicliffe to pen a letter to the House of Lords, outlining clarification about the treatment of corporate hospitality under the Act.
In the letter, Lord Tunnicliffe writes that corporate hospitality “is an accepted part of modern business practice and the Government is not seeking to penalise expenditure on corporate hospitality for legitimate commercial purposes. But lavish corporate hospitality can also be used as a bribe to secure advantages and the offences in the bill must therefore be capable of penalising those who use it for such purposes.”
Brian Kirsch, MD of Event Assured, also sits on the board of directors and heads the events industry trade body Eventia’s regulation committee. Kirsch fully agrees with Lord Tunnicliffe. “In the case of obviously lavish hospitality, it would be incredibly difficult to argue therwise,” he says. “But if the hospitality is transparent and ticks the boxes of reasonable, normal behaviour and intent, and is proportionate in terms of how much business you do or expect to do with that client, then I can’t see why in those circumstances a company could ever be taken to court.”
“There needs to be common sense applied,” adds Jeremy Summers, partner in the business crime and regulation team at law firm Russell Jones & Walker. “Being taken to Cardiff for an England vs Wales game isn’t going to present a problem, but giving someone a box at Cardiff to do whatever they like with, minus a host, may present red flags”.
The fear, adds Summers, is in nobody quite knowing yet what the boundaries are. The terms of the Act will be enforced by the Serious Fraud Office (SFO) and Financial Services Authority (FSA) who will “probably be looking at a couple of headline prosecutions to get the message across. But on the whole, I don’t think it’s going to change much for most of those involved in the corporate
hospitality industry.”
Grey areas
Russell Jones & Walker recently conducted a survey of 120 businesses in the UK to assess their preparedness and understanding of the Act. Some of the results can be seen in the box (right), but one of the most interesting outcomes suggested that four out of five employees in the media and advertising sectors think the Bribery Act will at least affect them moderately. If that’s not because they are worried about possible restrictions on ‘jollies’, it could be because of the negative impact of giving corporate gifts. That could put an extra chill in the winter air for many an organisation come Christmas time.
However, the clarification in what constitutes an acceptable gift versus an out-and-out bribe so far remains a grey area until the Act is enforced.
As a rule of thumb, Summers advises the use of common sense. “Nobody is likely to be penalised for sending a client a bottle of wine. A case of vintage champagne? Possibly a lot harder to justify as a casual ‘thanks for your business’ gift.”
Defining business relations
One thing the Act shows no signs of accounting for is the varying nature of business relationships. A prospect turned client can easily turn into a genuine friend as Rob Morrice, CEO of specialist B2B marketing agency IAS B2B, reveals.
“Sometimes you meet a client who you like. For example, I have a client who’s Irish, I’m Scottish, and we decided to go to the Scotland Ireland rugby match together. I agreed to buy the tickets and he agreed to pay for lunch. But if the ticket and lunch deal had been rolled into one package, and I pay for the lot as a favour to a friend, is that considered bribery as he’s also a client? If it goes to a level like that then it’s nonsensical.”
There’s also the issue of how the Act may impact the sponsorship industry. Formula One has certainly made a fuss on this point, lobbying against the Act’s implementation for fear a clamp down on so-called lavish hospitality, driving the sponsorship out of sport.
As Morrice points out, the issue of how the Act affects the placing of sponsorship deals could also become a very sore point in the run up to the Olympics. “If you’re going to become a sponsor and then you can’t fly your clients over to the Games in case it’s considered over the top – that’s a big issue to be addressed,” he says.
Putting procedures in place
So what can marketers do to best protect themselves against an Act that at the moment throws up so many questions and grey areas? The SFO has already indicated that while it will have high expectations of large, blue chip organisations – particularly those in high-risk sectors – SMEs and those operating in less risky sectors are much less likely to come under scrutiny.
Still, the advice is to err on the side of caution by re-assessing your company’s policies on corporate hospitality. Brands should also make sure that due diligence practices are tightly enforced – i.e. by carrying out sufficient background checks on third parties before entering into business with them.
“Make sure you have procedures in place in case you need to prove to a defence that you have not indulged in an act of bribery,” says James Milligan, solicitor, legal and public affairs advisor at the DMA, which recently circulated an article detailing what the Act will mean for businesses to its newsletter recipients. The article warns how the offence relating to ‘failure to prevent bribery’ is arguably the most controversial aspect of the new Act as it applies to commercial organisations and partnerships.
Until now, unless senior management was involved in an incident, only the individuals involved – not the entire business – was held responsible. This will all change – so if one person gets it wrong, the whole company could suffer. “Ensure that staff, contractors and agents, subsidiaries and other organisations within the group structure know about and adhere to procedures,” warns Milligan.
Rational thinking
Until the Act actually comes into effect there is no knowing as to who will be held accountable and for what, but the important message for marketers to take away is that it shouldn’t stop you from keeping clients and prospects warm with the odd bottle of wine or trip to the corporate box.
Acts of bribery that make waves and headlines are those such as the 2004 attack by then New York attourney general, Eliot Spitzer, who challenged big insurance brokers over contingent commissions – money paid to them for placing extra business with a particular underwriter. Kirsch reveals, “I worked at Aon at the time and the reaction to that was, ‘so we can’t spend more than $50 on entertaining anybody’. A sort of corporate paranoia ensued where they thought ‘We’re not even allowed to be nice to people anymore as it might be construed as improper behaviour’.”
Kirsch believes that in order corporate paranoia doesn’t settle, the media has its part to play in ensuring it doesn’t embark on witch hunts. He concludes, “The media could quite easily create a frenzied atmosphere by saying ‘This client has spent £150 a head entertaining all these clients – that’s bribery’. That sort of silliness could easily enter mainstream thinking, so the media has got to be responsible – as have all of us.”
For more detailed information on how the new Act could affect B2B marketers read our legislation update
