Here's a business sleight-of-hand incident in Singapore that is probably happening more often than expected.

Keeping iPhone X for itself

Novel Communication Pte Ltd, an exclusive retailer for Singtel, located at Northpoint City in Yishun, has been called out on June 2, 2018.

This was after it allegedly executed a sneaky phone switch without the explicit knowledge and permission of the customer.

The affected party is a woman who thought she had just bought the cheapest mobile phone available when her existing plan was up for a re-contract.

She eventually managed to get a refund and voided the contract, but not after her daughter went back to confront the shop's manager.

Here is a summary of what happened:

• A woman received a Samsung J3 Pro phone for just S$48 when her Singtel mobile phone plan was re-contracted and thought it was a good deal.

• She had visited a Singtel exclusive retailer located at Northpoint City.

• The woman's daughter then helped to set up the phone, but realised the J3 Pro is a lower-end Samsung model with a smaller screen compared to a Samsung Note 4.

• The woman's daughter then found the first page of the invoice showing the sale of the Samsung J3 Pro unit price at S$198, with S$48 amount paid.

• However, the subtotal showed S$1,346, which obviously didn't tally.

• The trade-in form also showed a cashback amount of S$198, despite no phone being traded in by the woman, who also wasn't given or compensated with any cash.

• But the re-contract document showed a handwritten note on the side saying, "Customer agree to trade back Apple iPhone X 64GB".

• The woman did not even know she had traded in an Apple iPhone X 64GB or how did it come about.

• The woman and her daughter then went back to the shop to speak with the manager.

• He then explained the Samsung J3 Pro is not a phone offered under the Singtel plan, but the shop offered it as the woman wanted to get a free or cheap phone that comes with a re-contract plan.

• Therefore, what the shop did was: It took the opportunity to use the woman's re-contract plan to get an iPhone X 64GB from Singtel, and then pushed a lower-end phone to the woman.

• This switch could be executed as the woman's re-contract plan made her eligible to purchase the iPhone X 64GB for S$1,114.

• As the same phone can retail without a contract for S$1,598 or more, the shop bought it on her behalf, and will most likely stand to make S$600 or more profit, if the iPhone X is sold off eventually to another customer without a contract.

• This way of dealing is known as a "trade back agreement", and according to the shop, Singtel is aware of this practice.

• The reason the woman ended up paying only S$48 was because of a S$150 re-contract voucher that she could use -- which presumably partially paid for the Samsung phone.

• However, it does not explain why did the shop not compensate the woman the S$198 cashback as stated in the invoice.

• In the end, the woman returned the Samsung phone, got back a S$48 refund, but still had to pay for a new SIM card and service activation fee, which came up to a separate S$48.15.

Why do shops do this?

Singtel has since officially responded to the woman's Facebook post, and it is apparent the telco is aware of such a practice by retailers.

One reason shops engage in trade back agreements could be due to the fact that some customers -- usually older folks or those who cannot afford expensive phones -- do not exercise their right to buy the higher-end sought after phones, such as the iPhone X, which they are eligible to do so when they re-contract a plan with a telco.

Mobile phones that are sold with a contract typically have some discounts attached, due to subsidies or cost absorption, as compared to mobile phones sold without any plans or contracts, which tend to be costlier.

Retailers can then practice some form of arbitrage by purchasing the iPhone X in such instances and reslling it subsequently.

It is understood that shops would give a cash refund to customers in such instances, but in this case, it is apparent there was none.

Singtel and Novel Communication respond

Two days after the issue blew up online, Singtel and the errant retailer has responded.

In response to Mothership.sg queries, a Singtel spokesperson said there were "lapses" in the way the transaction was handled:

"Protecting our customers' best interests is our top priority. To safeguard the sales process, customers at any of our shops are required to sign an agreement that clearly states all the transaction details. They will also receive an SMS alert that provides details of the handset model, price plan and date.

“We have investigated the issue raised by Ms Yeo Hui Ting and found lapses in the way our appointed retailer, Novel Communications, handled her mother’s transaction. We will be taking immediate disciplinary action against the retailer.

We regret the inconvenience caused and have since been in touch with Ms Yeo to redress the matter.”

However, it is not known what disciplinary action has been taken against the retailer.

Separately, Novel Communication has apologised to the affected customer:

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How can retailers practice this trade back agreement better?

How retailers do it with good retail etiquette and how ethical they can approach such a practice without raising a stink each and every time, is subject to how well they explain what they are doing to the customers, who in all likelihood, do not understand or cannot be bothered to do so.

But the value such retailers can provide the customer is to possibly offer a wider range of lower-end phone choices, that otherwise, might not be available, while at the same time incentivise this practice by paying customers cash upfront for not purchasing the higher-end phones.

One way to prevent such occurrences is to avoid exclusive retailers and head to the official telco shops for contracting matters.