Bribery Act and hospitality – businesses are nervous

When does Hospitality turn to Bribery?

With the emergence of the Bribery Act in 2011 a wave of nervousness has struck businesses with regard to corporate hospitality and the question now being asked is how much hospitality is too much hospitality?

This new act is causing those in business to tighten their belts where hospitality is concerned for fear of being accused of corruption.

The Bribery Act was intended to cause problems for the small percentage of corporations intent on corruption but instead seems to be having an impact on many businesses operating on the right side of the law.

Unreasonable or disproportionate hospitality will be seen as a breach of the Bribery Act as will failure in preventing bribes being made on behalf of companies and corporations will need to show that they have the appropriate procedures in place to deal with such occurrences.

This has prompted many companies to review their hospitality rules and employ the help of compliance officers.

The intention of prohibition of ‘lavish’ entertainment via the Bribery Act is causing great confusion, especially as there is no clear definition of exactly what constitutes ‘lavish’ entertainment. Companies are just not being made aware of how much is too much and are making drastic rule changes and over compensating to avoid falling foul of the law.

This couldn’t be more obvious than with Olympic sponsors. The 2012 Olympics are quite literally just weeks away and sponsors are still trying to finalise their ticket allocations. One particular sponsor felt that their opportunity to showcase their association with the Olympic Games to their clients had been lost and they certainly never imagined they would have to telephone guests to find out whether being their guest at the Olympics would cause problems.

Some guests are even requesting complete breakdowns of their hospitality packages so that they can calculate the exact value of each section.

Sponsors are also asking legal advisers whether their invitations should include the guests’ spouses and whether they should make the offer to pay the travelling expenses of guests coming from overseas.

Amongst others, two well known Olympic sponsors, Adidas and Lloyds, have made the decision not to take up their full Olympic allocation this year to keep it in line with the current economic climate.

Mr. Grant Rogan from Blenheim Capital, a company which organises offset agreements within the defence industry, has admitted that he has cut the company’s expenditure on corporate hospitality.

Blenheim Capital’s corporate hospitality includes Six Nations Rugby, Wimbledon and Royal Ascot and their average expenditure on corporate hospitality for these events is between $2 and $3 million but, because of the Bribery Act, Mr. Rogan has seen no option but to cut this amount down to £300,000. And again it all comes down to the ‘lavish’ entertainment thing.

Mr. Rogan believes it makes sense to play it safe and not test the boundaries unnecessarily until everyone is clear on the exact definition of lavish.

Mr. Rogan also claimed that he had noticed that some clients were willing to pay face value for their tickets and decline offers of hospitality for the Olympic Games and Wimbledon and some customers have even been prompted to remove their names from the corporate boxes.

Prestige Ticketing, the sole commercial Olympics corporate hospitality rights holders are offering their tickets for the opening ceremony at the highest price of £7,500 and, even though they are confident of selling their entire ticket allocation, having already sold 68% of the 100,000 tickets allocated to them, they don’t expect to make a great profit.

In 2008 the UK market for corporate hospitality was set at £1.04 billion, the forecast for 2012 is £1.03 billion and by 2013 the market for corporate hospitality in the UK is expected to drop to £1 billion.

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