Industry, private jewelers at odds over marketing

By the end of the week, the cruise tourism season will be over. Most of the ships will make their way south to the warmer waters of Hawaii, Mexico or the Caribbean. Most of the owners and operators of South Franklin Street’s many jewelry stores will head south as well.

 

So will the “port lecturers,” shipboard marketers largely invisible to shoreside Juneauites. Though relatively unknown to year-round Alaskans, these seasonal workers have an outsized and sometimes controversial impact on the shopping habits of cruise ship tourists. 

Last month, Kris Chhabria, the owner of Jewels by Kris and a Juneau resident of two years, filed a complaint with the Alaska Attorney General’s Office accusing a port lecturer of violating the state’s fair trade laws.

As Chhabria and saleswoman Joyce Warner describe it, the port lecturer came into the store and whispered to the customer, “Get a price and come back. We’ll give you a better price.” 

At the time, the lecturer was working out of Diamonds International.

“I was taken aback and appalled,” Warner said. “Even going home that day, I was still thinking, ‘How dare that person interrupt my sale?’”

 

Symbiotic relationships

Like the birds that pick clean the teeth of crocodiles to feed themselves, many of South Franklin’s jewelry stores and the cruise lines share mutually beneficial relationships. This is not because they own the stores. The two industries are instead connected by three Florida-based promotional companies: Onboard Media, Royal Media Promotions and PPI, itself a collective of several corporate entities sharing the same acronym. The company comprises Panoff Publishing Inc., Passenger Promotions International LLC and PPI Promotions Inc.  

The promotional companies pay the cruise lines to run special shopping promotions and seminars on each boat. 

During these seminars, salespeople called port lecturers provide passengers with information about the stores in each port. They pitch the stores and their brands, and they give shopping tips to people interested in buying jewelry once in port. 

These port lecturers are paid on commission. If they don’t make sales, they don’t make money.

The companies in charge of the port lecturers also print and distribute maps of downtown Juneau, advertising the location and wares of the various jewelry stores, but only the stores that pay the promotional companies. Businesses have to pay to play; that’s how these promotional companies make money, and it’s completely legal.

But some non-participating Juneau businesses say PPI is going farther.

 

Window shades

A week before the port lecturer allegedly visited Jewels by Kris, Chhabria noticed something strange: People leading window shoppers away from the area in front of his store. He believes the shepherds were port lecturers, but he didn’t report the incident; it isn’t illegal. The port lecturer who disrupted his sale, Chhabria said, crossed the line.

“That was it,” he said. “First, you take customers away from my window. Now, you take customers out of my store. What nonsense is this?!”

Chhabria caught the incident on video. He says it is a violation of Alaska’s Unfair Trade Practices and Consumer Protection Act.

“My hope is very clear,” Chhabria said. “I’m not going to be sitting over here taking a beating twice a week from shopping guides I don’t work with. You can’t just walk into somebody’s store and take their customers. I’m trying to send a message that you can’t.”

The video recording doesn’t include sound, however, and Buddy Levy, the general counsel for PPI, has a different story about what happened that day.

The way Levy tells it, the port lecturer walked into Jewels by Kris to inform the customer, whom she had talked to before, that she was available to help her when she finished with Chhabria. Levy also undermined Chhabria’s complaint by pointing out that Chhabria ultimately made his sale.

“She bought only because we told her how the port lecturers work; how they would be going on vacation with her commission,” Chhabria said. 

For him, the sale is irrelevant to the bigger point. 

“In this tough economy, what is happening with these port lecturers is unacceptable,” Chhabria said. “You don’t come to my store and bother me. I don’t bother you. It’s as simple as that. We all have to make money. We all have taxes, and we all have bills to pay.” 

 

‘It goes both ways’

Assistant Attorney General Cynthia Drinkwater declined to comment on Chhabria’s complaint, but Levy confirmed that Drinkwater had contacted him. He believes the matter is dead because he hasn’t heard anything from Drinkwater since she contacted him three weeks ago.

Levy said the owners of non-participating stores are not the only people who file complaints with the attorney general, nor are they the only people to feel harassed. He said he regularly hears and files complaints about storeowners harassing PPI’s port lecturers. 

“It goes both ways,” Levy said. “This season, more than in the past, there have been more non-participating merchants intimidating port lecturers, and that goes for the other companies, too. I think that’s a function of the economy.”

Levy said that he filed between 15 and 20 complaints against non-participating merchants with the attorney general this season. In addition to port lecturer harassment, Levy said he has filed complaints against merchants for spreading rumors that the cruise ships own the jewelry stores. He has also filed complaints against merchants for displaying signs in their businesses that disparage the promotional companies. He said he has never filed a complaint against Chhabria.

Raj Bathija has owned and operated Celebrity Jewelers and Gifts with his brothers for more than a decade. One of Celebrity’s two stores is located next to Jewels by Kris, and Bathija keeps a large sign on the store’s wall. In part, it declares, “We’d rather not give your cruise ship a kickback!”

The law permits signs like Bathija’s as long as they don’t contain false information, Drinkwater said. 

Levy is probably not wrong when he said the increased animosity between promotional companies and non-participating merchants is a function of the economy. On this point, Levy, Chhabria and Bathija agree. 

However, it’s not just the economy that is driving the competition. 

“The whole situation is a lot more intense in Alaska than it is anywhere else we operate,” he said. “We don’t get any complaints of port lecturers being treated poorly in any of our other jurisdictions. It’s just more combative there.”

Levy said he suspects this is due to the short season in Alaska, a fact that both Chhabria and Bathija know all too well. 

Both close their own shops for the winter and rely on their summer sales for the whole year. One of Celebrity’s locations is open by appointment only in the offseason.

“Alaska has a limited season, and if you don’t make it in those months, you don’t make it,” Levy said. “PPI has stores all over the world, so we don’t live or die by how we do in Alaska.”

 

A history of problems

In February 2013, after having received a consistent stream of complaints regarding port lecturers, the attorney general’s office entered into a settlement with PPI, Onboard Media and RMP in an attempt to make sure they are conforming to the state’s Consumer Protection Act. 

The settlement was the result of a civil action filed against the promotional companies by the state. In its complaint, the state asked for “monetary and injunctive relief for violations of Alaska’s Unfair Trade Practices and Consumer Protection Act.” 

Drinkwater said two key factors led to the civil action and the settlement.  

“Over the years, this office received complaints from retailers in the Southeast about what was happening and accounts that the port lecturers were disparaging businesses that weren’t in their business,” Drinkwater said. “We also received complaints from consumers who didn’t understand the financial interests of the port lecturers.” 

In the state’s complaint, the attorney general alleged, “some or all of the defendants’ port lecturers have unlawfully disparaged businesses that are not part of the shopping program in a number of ways.” 

According to the Attorney General’s complaint, port lecturers were

• Misleading passengers to believe that purchasing jewelry from non-participating merchants was risky;

• Claiming that the merchandise of non-participating merchants was inferior;

• Telling passengers that non-participating stores don’t offer guarantees.

As a result of the settlement, each of the promotional companies agreed to pay a fine. PPI paid $90,000, Onboard Media paid $75,000 and RMP paid $45,000.

 

Changing behavior

The companies also agreed to more closely monitor their employees for violations of state law.

“The focus of the settlement was on changing conduct, and the companies were willing to do that and set up procedures to do that,” Drinkwater said. “It wasn’t so much about the money as it was about changing behavior.”

Changing behavior was not an easy or cheap task, according to Levy, who works specifically on matters of compliance and oversees all of PPI’s dealings with the Alaska Attorney General. Levy said that in the wake of the settlement, PPI had to create a compliance department. Levy himself leads a weekly compliance meeting, he said.

“It takes a lot of time and effort to make sure we are in compliance, but it’s important to us,” Levy said.

For anybody keeping a close eye on these promotional companies, the attorney general’s complaint wouldn’t sound unfamiliar. Bathija and his brothers filed a similar civil suit against PPI and Diamonds International about a decade earlier, based on nearly identical allegations. The Bathijas’ complaint went further, implicating Diamonds International, which the brothers accused of conspiring with PPI to advertise against Celebrity. 

Bathija began promoting with PPI in the early 2000s, but that relationship was short-lived. In 2004, Bathija and his brothers sued PPI and Diamonds International, alleging “breach of contract, unfair competition, violations of the antitrust laws, fraud and misrepresentation on the part of the defendants,” according to court documents.

The Bathijas’ suit was eventually dismissed with prejudice. Bathija declined to comment on anything regarding the lawsuit. 

At the time of the suit, Celebrity was also paying to be promoted by Onboard Media. The Bathijas continued to buy into Onboard’s promotional program for a few years after their suit against PPI was dismissed.

“There was no difference,” Bathija said, explaining why Celebrity pulled its business from Onboard. “We realized we were paying for the same thing. They all work the same way. The money just goes to a different place.”

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