Saturday, May 18, 2024
 
 

Corporate reputation warfare presents risk to business’ bottom line

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It’s a well-known fact that healthy competition plays a significant role in helping to ensure consumers and clients alike receive better services, experiences and returns in exchange for their business. 

However, in an ever more crowded marketplace, where businesses face competition from around the world, the desire to succeed at all costs, seems to be increasingly becoming common practice, even if it comes at the expense of others. 

Reputation is one of the single most powerful tools in a company’s arsenal in achieving, and more importantly, maintaining long-term growth and success. 

There is no shortage of ways in which competitors can purposefully damage a firm’s reputation, causing financial losses or even going so far as to sabotage a business to the point it can impact its bottom line and share prices, often jeopardising its ability to survive. 

In the age of ‘fake news’, where the internet and digital communication dominates the way we communicate, receive and digest news, the practice of actively pursuing an adversarial campaign to harm a competitor is becoming increasingly more prevalent. More and more frequently, we are seeing competitors and other invested stakeholders pushing out false narratives with the ultimate aim of hurting an organisation’s reputation in an attempt to serve their own interests. 

Sniping, a practice common on online marketplaces such as Amazon, whereby a seller purposefully sabotages their competitors by paying for negative reviews and then voting them as helpful, thus making them the most prominent to feature in the feedback section, is just one way businesses try to steal business from competitors. The practice was highlighted in a Bloomberg article in 2017 when a popular children’s toy retailer on Amazon found himself the victim of such a campaign by a rival merchant.  

While common on online marketplaces such as Amazon and eBay, thanks to the rise of falsified Google reviews, deep fakes and old fashioned underhanded tactics, the practice seems to be permeating more traditional businesses and industries and is sadly not a new phenomenon.

Back in 1993, Virgin Atlantic launched a successful libel case against British Airways after it was found to have run a ‘dirty tricks’ campaign which included ringing up Virgin’s customers to tell them their flights had been cancelled.

More recently, In 2013 hackers gained access to the Associated Press’s Twitter page and falsely tweeted that two explosions had rocked the White House, injuring President Obama. As a result, $130 billion was wiped off the value of the stock market. 

A view of a hacked Twitter account in Germany. EPA-EFE//CLEMENS BILAN

In real-terms, such practices can cause harm to more than just the parties directly involved, people have lost jobs, investments and even faced legal repercussions as a result.  

Emirates REIT is another business which, in the last year, seems to have been the subject of an adversarial campaign of deliberate misinformation, which has not only resulted in a collapsing share price, but also regulatory repercussions.

Following a letter from shareholders raising concerns over the fund manager, Equitativa, published in local media, the DFSA, the Dubai financial regulator, launched an investigation into the fund and its activities. Straightforward one may say, until you dig a little deeper. 

An independent third-party investigation has found evidence to suggest that rival fund manager Dalma Capital, are likely behind a campaign to replace Equitativa as the fund manager. 

To date, that campaign includes possible market manipulation, as supported by a DIFC Courts judgement in October 2020, which ruled that suspect trades in Emirates REIT stock, made in February 2020, were a form of market manipulation executed to artificially lower the share price. However, the judge also ruled that Emirates REIT would not be allowed to pursue NASDAQ Dubai for the identity of those behind the trades, nor could they try to recoup any losses.

The independent report also found evidence of coercion of the media in order to publish negative articles against the fund manager, going so far as to directly approach investors in the fund outlining their ambition to replace the current manager.

Investigators also found evidence to suggest an email address linked to senior figures at Dalma Capital, was used to register a fake identity to attend the REIT’s investor call in September 2020. According to the transcript of the call, using an alias, the individual asked several questions that concerned the same specific allegations that had been made by another shareholder, himself with personal and commercial ties to Dalma, in a previous email that would otherwise not have been known to anyone other than Equitativa or the parties involved in sending the email.

Well-connected industry sources in the report suggest that this is not the first time Dalma has used such tactics against competitors, with one source at a well-known local bank in the UAE saying that instigating a DFSA investigation into a competitor is consistent with their approach to business.

The impact of this campaign, which has also been waged over Twitter, is in part, a major factor in the falling share price of Emirates REIT and has made it harder for the fund to find new joint venture partners and secure financing, exacerbating the problem further. Given how small the UAE market is, ultimately, this is likely to have a wash-back effect not only on Dalma Capital, but other market players.  

The report was shared with the regulator, who acknowledged receipt, however, other than the existing investigation into Emirates REIT, no action in response to its findings has been taken to date. 

EPA-EFE//MARIUS BECKER

Today, it seems as if the rumor mill has taken on even more of a critical role and the impact of fake news, now spread around the world so easily through the Twitter-sphere, means reputations can be destroyed overnight, even over things neither said nor done. 

One only needs to look back to 2016 to find several high-profile examples, from Trump supporters calling for a boycott of Pepsi over a quote its CEO never actually made, to the Pizzagate scandal, the consequences of such campaigns can be dire.

There will always be those who will be looking for an organization’s weak link to push out this sort of fake news. Ultimately, the practice is so rife, it is not only just high-profile well-known multinationals who are affected, and the fallout can be far more fatal for smaller independent firms. The challenge lies in how to best pre-emptively protect one’s business should the worst happen.

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Former editor-in-chief of NE Global. Mr. Waller is a veteran journalist, analyst and political advisor, having spent 25 years covering the former Soviet Union, Europe and the Middle East.

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