On hearing that the Hong Kong jewelry tycoon Tse Sui-luen and his son Tse Tat-fung were arrested for allegedly offering illegal commissions to travel agencies, many Shanghai business operators denied they offer similar hidden commissions to tour guides.

Some storeowners and industry insiders did admit, however, that tour guides from small companies often accept commissions without the approval of their bosses, and company-to-company commissions are common in the industry as a way to lower the price of tour packages, as well as a major source of profits.

"We've never done anything like that," said Wu Derong, manager of Shanghai China Youth Travel Service. "We just sign contracts with airlines and hotels to obtain discounted seats and rooms, and then, sell them to tourists at a higher price. That's where our profits come out."

He said those who guide tourists around the city may frequently cooperate with local shops, promising to take their guests shopping in return for a small commission.

"That's why shopping is an inevitable part of group tours."

Tse Sui-luen and several TSL employees were allegedly involved in a scheme to offer kickbacks to employees of a number of travel agencies, as rewards for bringing tour groups to the TSL showrooms, and helping them evade tax.

Peter Yu, vice manager of the outbound tourism department at Shanghai FASCO International, said large local agencies that accept commissions tend to follow proper legal procedures.

"Agencies don't love to accept commissions, but it's a good way to reduce tour prices," he said. "Since most Chinese tourists still regard price as the only standard when they choose their tour providers, we simply try to meet their needs."

The Shanghai Tourism Administrative Commission said travel agencies can legally accept commission as long as they sign formal contracts with scenic sites and shops, and record the deals in their accounts.

The issue hasn't cast a shadow on TSL's sales on the Chinese mainland, said Florence Wong, a marketing manager for Beijing TSL Jewelry Ltd. "The Chinese mainland market is independent from the Hong Kong market and we will carry out our development blueprint still. Some customers have inquired about the issue but they are still interested in our brand."

(Shanghai Daily April 26, 2005)