Tim O’Callaghan is a partner in Druces LLP, specialising in advice to the fashion and luxury goods business. In this month’s column, he discusses the Bribery Act and its relation to the lingerie industry.

Although perhaps occurring as infrequently as the average man changes his underpants collection (see Lingerie Insight bulletin on April 22) the possibility of prosecutions under the Bribery Act 2011 in the industry is a reality that all businesses in the sector should be aware of.

Story continues below

What, you may ask, has bribery got to do with the intimate apparel industry? Whilst it is (hopefully) unlikely that suitcases full of used dollar bills, left in airport lockers, are of much relevance to your business, a great deal of focus has been put on ‘corporate hospitality’ which, if excessive, can amount to a criminal offence under the Act.

Story continues below

By excessive corporate hospitality I do not mean going for an extra bottle over lunch with your biggest client, but something that is genuinely disproportionate.

A not unlikely scenario may be this: Your production manager is touring Chinese factories and three factories are competing for your big new high street order. Each factory takes your production manager out for a lavish dinner. After one of the dinners, a knock on your manager’s hotel room door reveals a beaming courier holding a package with a label that reads ‘courtesy of your new factory’. Upon opening the package, there is a rather large gold watch.

Were your production manager to accept the watch (even without choosing that factory) then the criminal offence of bribery has occurred and your production manager, and your company, would both be guilty. This is despite the fact that in China such practices are a perfectly normal means of ‘oiling the wheels of commerce’ and despite the fact that the ‘bribe’ occurs not on UK soil but in China.

Another possible scenario: You are due to shoot your new lookbook at a country house hotel and you are deciding between two competing luxury hotels. You let the hotels know that the decision has been narrowed down to a decision between the two of them. One of the hotels contacts you to say that, to help you decide, you are welcome to bring your family to stay for a week, with food and drink, free of charge. Were you to accept their magnanimous offer, you would be guilty of having accepted a bribe, and if discovered, you could be criminally liable.

If, on the other hand, one of your biggest buyers was in town and you took their buying team out to a long lunch and a West End show you would not fall foul of the Act. Your generosity would be treated as ordinary corporate hospitality.

Admittedly, it can be difficult to draw the line. You can safely say though, that where money changes hands or ‘excessive benefits’ then the Bribery Act would apply.

For corporate hospitality to be permissible and not to fall within the remit of the Act it needs to be “reasonable and proportionate” and must seek to “improve the image of the organisation, better present products/services or establish cordial relations”. It is important to note that there is no ‘minimum’ amount of bribe that will trigger the application of the Act.

One of the first prosecutions under the Act was for an aspiring minicab driver who was seeking to pass his driving test. He failed, but proceeded to offer first £200, then £300 to an unimpressed test official to ‘change’ the result.

The desperate fellow was reported and spent two months ‘at her Majesty’s pleasure’ as a result. It may seem a harsh sentence for such a hapless attempt at bribery, but it demonstrates how seriously the government takes the matter.

Also, it may come as a slight surprise that not only is it an offence to offer a bribe but, as demonstrated in the above examples, it is equally an offence to accept a bribe.

There has, understandably, been a great deal of press around the Bribery Act, which extends liability to British businesses doing business abroad. The arguments have generally been around whether the Act would make it difficult for British businesses to do business abroad and compete on a ‘level playing field’ with international competitors who are not burdened by such enlightened legislation on the statute books of their own country. The result has been that some large businesses have had to withdraw altogether from certain countries where what we call ‘bribery’, but what they call ‘business’, is endemic and necessary to win contracts.

You may also be forgiven for thinking that if it is your employee who accepts and benefits from a bribe, then liability, if any, should rest with your employee and not extend to your business. Unfortunately, the law thinks otherwise.

What can you do to avoid liability?

The only defence to corporate culpability for bribery is to have an anti-bribery policy. Without it, if an employee commits bribery your business will also be liable. The anti-bribery policy should be included in your staff handbook and given or notified to all employees.

They should also receive some instruction or training in compliance with the Act. If all that is followed, and only if a sound anti-bribery policy is in place and followed, will the company have any defence against a criminal claim that one of its employees is guilty of the offence of bribery.