Tuesday, 22 July 2014 00:00

It seems easy to say ethics

Associations define codes of Ethics and commit their members to adhere to them. But when business is involved, everyone gives a different interpretation of "professional conduct". There are very few parameters, and it is the time to contribute to the definitions of guidelines. Our magazine has chosen the method of real case histories to use as food for thoughts. The opinion of valuable law experts will help to move from words to practice.

by Rodolfo Musco, CMP, CMM

This is a real case that may contribute to define guidelines of professional conducts. It is not important to know the "characters", but the substance: For this reason, names and other references that may identify parties have been skipped.


Background

Mr. "X" is a veteran of the Meeting and Incentive travel industry, well known world wide for his commitments to associations, industry press and education.
In 1977 Mr. "X" is among the four professionals who registered an agency named "AAA". In 1978 Mr. "X" and partners registered another company with another name, which soon became the leader of the national MCI market.

 

In 1985, Mr. “X” sets up a third company, and ten years later registers a trademark “AAA & BBB”.

In 2001 a web domain “AAA&BBB.com” was licensed. In fulfilling the track for the registration of the dominion, it appeared that a web site “AAA.It” was in use.

Some of “AAA&BBB” clients becameconfused as they addressed messages to “AAA.it” with the intention to dialogue with “AAA&BBB”.

A few months later, at a seminar released by Mr. “X”, managers of “AAA” appeared among the participants.

In Autumn of the same year, the same “AAA” managers registered for a seminar released by the president of the company using the trade mark “AAA&BBB”.

The case

< Dear colleagues – said Mr. “X” in a private talk – one of the two companies must change its trademark to avoid confusion, as stated by the law. Since last summer, you have added an acronym to the trademark “AAA” that you are using, and, in words, you stress the final letter of this industry acronym, that sounds exactly like the “BBB” of my trademark “AAA&BBB”.

Now, since we are members of the same international associations and our companies are based in two different cities, why don’t we try to co-operate by combining our different specialisations to reach a synergetic effect on the market for a mutual interest? I am starting the process for a conference in your city. Shall we use this event to know each other better? This is the briefing. The first basic step is to find an allotment of 130 rooms in a five-star hotel. Would you look for it? >

In a few days the allotment came out, and Mr. “X” flew to the destination to site inspect the proposed hotel. It was easy to discover that hotel rates had been marked up by 20%.

< Let us be more clear: I have been managing this client’s events fora few years, and I need to conduct a negotiation that allows me to present a meeting package rate rather than just conference rooms rates, that is within the total budget. Moreover, the hotel’s main conference room does not fit the client’s needs, since it is too long and narrow. I need to produce new special tables to obtain a special set up on the “long” side, and, because of the low ceiling, I need to contract a lighting system, as well as special technologies. All this must be included in the “meeting package”, so I need to dialogue directly with the hotel. Let us agree to this: your company will take care of the catering in and out the hotel, as well as transfers and excursions. My company will be the responsible contactwith all third-party suppliers on the client’s behalf. Let us operate on net costs, and I will award you 10% on the segments that you work on.>

 “AAA” agreed and proposed some social activities as well as a theme function and a venue for the gala dinner. “AAA” also provided a chart of costs for thegala dinner, transfers, guides and hostess.

During a second site inspection, Mr. “X” determined that three of thefour proposed venues for the gala dinner where totally out of the question, because they could not host 170 persons in one room. Mr. “X” also explained that the proposed social program was not suitable because of its timing.

A prepayment with a clear statement “to confirm the venue for the gala dinner” was sent to “AAA”, while “AAA&BBB” prepaid the hotel directly.

“AAA” sent to “AAA&BBB” a request for prepayments up to 90% of the total, including transfers, guides, and social activities.

<I must inform you that:

  1.  The transfer rates and the charge for airport assistance are much higher that what I normally pay in your city (“AAA&BBB” managed four different events in one month in that same city in the Fall 2001!)
  2.  As promised, the participants list will be available 3 weeks prior the event, and it will give us the transfers needs, as well as the excursion numbersand the final numbers for the catering
  3.  We cannot accept the social program on Thursday because of the timing, and cannot prepay a social program for which you have availability only as a second option (and more, it does not fit our needs)
  4.  We need to negotiate with the gala dinner supplier as we need to amplify your suggested theme dinner with a special show.
  5.  We confirm that we will award you the 10% on net costs for catering, transfers and excursions, once approved.>

The answer of “AAA” company came at once:

<Proceed with direct contacts with the gala dinner suppliers. Because you did not send us the requested 90% of the expected costs, we renounce to our co-operation. Our estimated revenue from catering is more or less equal to the amount for the prepayment of the venue for the gala dinner, so we are keeping this money for us.>

A phone call also arrived to inform that “Do not include the 10% for the gala dinner catering, as the rates that you have already received, include a rebate that the caterer will give us.”

Thankfully, the managers of the venue chosen for the gala dinner kept the reservation and were happy to receive a prepayment of 40% (not 90%) just 10 days prior the event.

The client’s prepayment arrived just one week before the event.

As a surprise, the basic concept for the “theme” for the gala dinner was not included in the rate.

The overall costs for transportation, assistance and social activities supplied by “AAA&BBB” contractors went down by an average of 20%.

“AAA&BBB” has provided to “AAA” a detailed final chart of costs for the catering, to document the amount of the promised rebate of 10%.

The event was a great success.

Points that seem to be definable as a mis-conduct

  1. “BBB” marked up rates without informing “AAA&BBB” (the agreement was to joint venture on this case, and was clear that “AAA&BBB” could not be considered a client but a partner with a full responsibility of contacts with the client);
  2. Even after the “clarification” about rating and rebates, BBB continued to hide mark ups (certainly for the catering of gala dinner, as they admitted few days before the event;
  3. “BBB” pretended a 90% of prepayments even on services – such as guides and transportation – that are not subject to prepayments;
  4. “BBB” pretended prepayments on visits of museums that they where holding  in second option (with no guarantee to be able to supply to the client). The same service had been refused by the “partner” because did not fit the schedule and the contents of the event.
  5. “BBB” did not transfer the prepayment to the venue for the gala dinner. Should the managers of the venue have cancelled the option at the due time for not having received the amount agreed for the confirmation, a relevant damage would have occurred, as it is not easy to relocate a party of two hundred people in a short time and during a peak season.

The word to arbiters

The opinion of a “global” meeting professional [1]

After reviewing the history surrounding this ethical question, I would make the following observations:

  1. I believe that Mr. “X” is within his legal rights to force “AAA” to return the deposit they withheld that was clearly identified “to confirm the venue for the gala dinner”, since the deposit was not used as intended.  “AAA” s argument that this amount was “more or less equal to the estimated revenue from catering” is irrelevant.  In the United States this would be considered as “fraud” and legal action would be taken.
  2. The fact that “AAA” requested pre-payment on a social program that was only held as a “second option”, is ridiculous.  Any meeting professional in their right mind would never honor such a request. 
  3. The fact that the transfer rates that “AAA” proposed to Mr. “X” were much higher than he was accustomed to in that city, indicates that “AAA” had up-charged these costs.  This is in direct conflict with the original agreement that they would work on “net costs” for catering, transfers, etc.  Again, an example of their unethical practices.

I believe that Mr. “X” was very generous when he provided “AAA” with a detailed final chart of costs for the catering to document the amount of the promised rebate of 10%.  I would not have provided them with any information at all.

Finally, I certainly would not consider “AAA” an ethical company that I would do business with.  While this particular scenario may be merely an “example”, I believe that there are actual companies like “AAA” that exist today.  It’s unfortunate that in an industry where ethics is purported to be a cornerstone of our business, that these exceptions exist.


[1] Diane Smith, CMP, 

 

 

 This article is copyrighted. Any partial or total use of its content without the authorization and the reference of the autor will be prosecuted by SIAE, Editors and Autors Society



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