Brands on the run

Some of the UK’s top companies are in the dock this summer over activities which range from the dodgy to the downright illegal.

Infamy beckons for a number of the nation’s favourite brands as the crimewave sweeping across UK plc undermines that most precious of assets – public trust.

British Airways is preparing to cough up £270m in fines after regulators found it had connived with Virgin Atlantic to illegally fix prices on fuel surcharges. Those suspected of masterminding the scam at BA – top marketer Martin George and public relations boss Iain Burns – have resigned from the airline (George left with a £1.6m pay-off) and news is awaited on whether they will face criminal charges.

Meanwhile, Cadbury is forking out £1m in fines imposed for food hygiene offences after it knowingly put “unsafe” chocolate on the market last year causing a salmonella outbreak which poisoned over 40 people.

And to top it all, it transpires that national television – the main conduit for communicating the trustworthiness of brands – has been revealed as rife with crooked practices.

For years, it turns out, many television phone-in competitions – a lucrative source of profits for commercial stations – have been run dishonestly, deceitfully and illegally. Viewers have been urged to ring in to the phone-ins at premium rates even after potential winners have been selected.

Channel 4 has been forced to axe its entire portfolio of profit making phone in competitions, at a stroke wiping out some £10m of annual profits – nearly half its pre-tax total.

These cases underline the extreme pressures facing modern businesses. As super-charged competition grows, margins are becoming razor thin and companies are having to find ever more inventive ways of staying ahead of their rivals and turning a profit.

What is significant about the BA/Virgin Atlantic price-fixing scandal is the miniscule sums involved in the cartel. The two agreed to fix price rises on fuel surcharges of £6, £10, £16 and £30, perhaps less than one percent of the total cost of some of the flights.

It says much about the delicately poised nature of the long-haul market when concerns over such microscopic differences in pricing can cause marketers to commit the business world’s most heinous and anti-competitive crime.

The situation can only get more cut-throat as world air travel markets are thrown open to competition with open skies agreements.

Some argue that in the current atmosphere where procurement departments are carefully patrolling businesses and increased protection is offered to whistle-blowers, executives involved in malfeasance are increasingly likely to save their own skins and turn into snitches. Perhaps some of the corporate responsibility mottos which are being adopted by companies are also having an effect.

Could such forces have been at play at Virgin Atlantic, which originally notified the authorities about the price collusion with BA? Or did it get caught with its trousers down and agree to fess up?

Meanwhile, in the case of Cadbury, no evidence could be found that a cost-cutting drive at the company was directly responsible for the lapse in its procedures that led to it selling infected chocolate. The exact reasons why the disaster happened remain a mystery.

However, the fake TV phone-ins did become a way of replacing commerical advertising revenues which are getting harder to find as hundreds of new channels are launched.

Now these ploys have been rumbled, the brand owners concerned are putting their houses in order and are getting back to some responsible business practices.

But the pressures that led to these lapses are not going to disappear. If anything they will get worse. Companies are desperate to ensure stability of profits but this is continually under threat from hyperactive competition.

Success in business naturally requires an element of anti-competitive behaviour, though not necessarily of the illegal kind. Whatever happened to good old-fashioned marketing, developing goods and services so superior that they beat the competition hands down in a fair fight?

Such a notion looks increasingly quaint as technological advances mean product superiority can be imitated and wiped out in days.

You shouldn’t have to break the law to cement a market leading position. But as pressure cranks up on executives to bring in higher profits, the temptation to cross the line grows ever greater.

Perhaps marketers could develop a Frequent Offenders Club, with extra points for fines incurred.

And maybe Quaker is the only brand owner which will profit from all this, as more business executives are forced to do porridge.

David Benady, contributing editor