The first major official survey of procurement abuses in Japan’s hotel industry has uncovered a culture of intimidation that forces suppliers to buy unwanted goods to keep contracts.
The Fair Trade Commission (FTC) launched a full-scale investigation and found that more than 40 percent of hotels and Japanese-style “ryokan” inns were asking suppliers to buy products and services they didn’t need. In more than 80 percent of those cases, the suppliers acceded to the hotels’ demands.
The products the hotels were hawking included seemingly minor items such as tickets for dinner shows, Christmas cakes, New Year’s dishes, summer and year-end gifts, and meal coupons, but the cumulative costs were a major burden for some suppliers.
The operator of a fruit and vegetable store in the Kyushu region told The Asahi Shimbun that the head chef of one hotel called him every year-end to sell tickets to dinner shows.
Each ticket costs more than 10,000 yen (about $125) and, as several shows are held at the hotel every year-end, all of his store’s December profits had gone to buy tickets in some years.
The man, who asked not to be named, said most of the other attendees at the events were owners or employees of other suppliers.
“I cannot reject the request when I am asked by the chief chef of the hotel that places orders with my store,” he said.
The operator of a fish shop in the Tohoku region, who also wanted to remain anonymous, said suppliers at one hotel had agreed to buy a certain number of Christmas cakes every year depending on the extent of each business’ turnover with the hotel.
“I have never refused the purchase. That could hurt my business with the hotel,” the man said.
Since November 2011, the FTC surveyed 1,625 suppliers selling foodstuffs and other products to 5,975 hotels and inns. About 2,533 of those hotels and inns had asked 950 suppliers for unrelated purchases and about 2,053 managed to sell the goods. The FTC will now investigate whether particular sales constitute an “abuse of a superior bargaining position,” which is banned under the Antimonopoly Law.
“If we find an illegal act, we will take strict measures against the hotels or inns involved,” said an FTC official.
It was the first time that the FTC had conducted a large-scale survey of the demands made by hotels and inns on suppliers. Many of the suppliers that responded to the survey were small companies with 10 employees or less.
About 20 percent of the suppliers said the demands had decreased in recent years, but more than 40 percent said either the number of demands or their monetary value had increased or remained the same.
In some cases, the buyers and head chefs of hotels explicitly threatened to deal with new suppliers or to cut their business entirely if purchases were not made. One supplier said meal coupons were sent without consent and their total amount was deducted from its monthly bill.
In another case, an association of suppliers controlled by a hotel was used to handle the back-channel sales. The association harvested amounts ranging from several hundreds of thousands of yen to several millions of yen from each supplier, depending on each firm’s turnover with the hotel, and bought tickets for dinner shows and other programs.
The office of the association is located in the hotel and its management is controlled by the hotel.
One supplier said it had been explicitly implied by the hotel’s staff that it should return 5 percent of its sales back to the hotel in “support money” because the hotel’s business was suffering.
The Japan Ryokan and Hotel Association, which represents about 3,000 hotels and inns, said: “We delivered the FTC reports to our members. We are telling them to improve compliance.”
Nobuyuki Okamoto, professor of tourism at Teikyo University, said the FTC survey showed the old-fashioned practices of the hotel and inn industry in Japan. However, with an increasing number of foreign tourists to Japan, he said the persistence of such customs was unacceptable.
“Hotels and inns should raise their awareness of corporate ethical issues,” he said.
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