Harrods’ 2010 Acquisition by Qatar Raises Questions Over Missed Red Flags Amid Abuse Allegations
In 2010, Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), purchased luxury department store Harrods for £1.5 billion. What was intended to be a jewel in the Gulf state’s crown has now turned into a scandal, as Harrods faces serious sexual abuse allegations connected to its former owner, Mohamed Al Fayed.
A recent BBC investigation brought to light numerous allegations against Al Fayed, including a 2008 police investigation into the alleged assault of a 15-year-old girl in a Harrods boardroom. Legal experts now suggest that Qatar may have either missed or overlooked these red flags during the acquisition.
Harrods, in a statement to the BBC, expressed being “utterly appalled” by the allegations and has since issued apologies to the victims. The department store also acknowledged vicarious liability for some of the claims, which could result in substantial financial and reputational damage for the company and its Qatari owners.
Inadequate Due Diligence?
During any acquisition, a thorough process known as due diligence is conducted to uncover potential issues. In the case of Harrods, experts believe that Qatar’s due diligence either failed to detect the sexual misconduct allegations surrounding Al Fayed or that the Qatari buyers chose to proceed regardless.
Beth Hale, a partner at CM Murray, suggested that in today’s climate, any buyer would ask detailed questions about claims, complaints, and non-disclosure agreements. However, she noted that in 2010, before the #MeToo movement, sexual harassment claims were not scrutinised as rigorously as they are now. “Sexual harassment claims did not form as big a part of due diligence then as they do now,” Hale explained.
Catriona Watt, a partner at Fox & Partners, echoed this sentiment, indicating that Qatar may have been aware of the allegations but went ahead with the purchase as a calculated risk.
Cultural Considerations and Brand Alignment
Virginia Albert, a former marketing professor and account director at DeVito/Verdi, also raised the possibility that Qatar’s government, with its differing views on women’s rights, may not have considered the allegations severe enough to halt the deal. She argued that when brands merge, they often align based on shared values, suggesting that the Qatari state may have felt its values aligned with those of Harrods at the time.
Lazard, the firm representing Al Fayed during the sale, issued a statement condemning the behaviour highlighted in the reports. Meanwhile, Harrods and the QIA declined to comment on the due diligence process involved in the deal.
Financial and Reputational Fallout
While the full extent of Qatar’s knowledge during the 2010 acquisition remains unclear, the fallout from the abuse allegations is expected to be significant. Legal experts predict that Harrods could face millions in compensation payments to survivors, with individual claims likely reaching six-figure sums. Additionally, costs related to defending legal cases and investigating the claims could further escalate.
The reputational damage may prove even more damaging. Virginia Albert warned that Harrods risks alienating customers unless it takes swift and decisive action. While the store may retain its long-time shoppers, casual customers disillusioned by the way the allegations are being handled could easily take their business elsewhere.
The future of Harrods now hangs in the balance, as the luxury retailer grapples with the implications of past failures and how they will shape its future.
