There are many lessons to be learned from the demise of KPS. According to a recent Small Claims Tribunal decision, the video chain acted in an 'unlawful and unreasonable' way in unilaterally changing the conditions for customers to use pre-paid coupons. At the time, such drastic action was portrayed as necessary to stop the company going into receivership. In the event, it not only failed to prevent this but may even have accelerated KPS's downfall. Some angry customers tore up their membership cards. Others vowed never to use the video chain again. Not surprisingly, sales suffered as a result. Indeed the company's main shareholder cited poor sales and rental figures in the months since the changes to the coupon scheme as one reason behind the decision to go into receivership. The intentions of KPS management may have been honourable in trying to save the jobs of 430 staff and keep the business a going concern. But the lesson for companies facing financial difficulties is that breaking the law is no solution. While this may sometimes seem a tempting option for those experiencing severe cash-flow problems, the KPS experience shows that it only harms a company's reputation. But while KPS should not have acted unlawfully, nor should it have had the law stacked against it. Legislation banning parallel imports, which was passed under heavy US pressure last year, clearly played a major part in the company's demise. By distorting the free market, it allowed local distributors to increase charges to unviable levels, and made it almost impossible for KPS to compete with pirate VCDs. Perhaps Director of Intellectual Property Stephen Selby, who played a key part in pushing this law and recently rejected calls for a rethink, would care to explain how he feels about having indirectly contributed to adding up to 430 more people to the growing ranks of the jobless. A review of the parallel imports ban is now vital. More immediately, other companies in a similar financial predicament should learn from KPS's downfall. Hong Kong is a city where the rule of law must be paramount. While the cards may have been stacked unfairly, it was KPS's decision to go beyond the law that sealed its fate. This should serve as a moral to anyone contemplating similar action.
