Chapter 2Chapter 2Ethical & Legal Issues in Selling

Ethics DefinitionEthics Definition

*Principles governing the behavior of an individual or a group. These principles establish appropriate behavior indicating what is right and wrong.

The Evolution of Personal SellingThe Evolution of Personal SellingExhibit 2.1 – Page 31Exhibit 2.1 – Page 31

Ethics & Partnering Ethics & Partnering RelationshipsRelationships

*Built on trust*Studies show trust deteriorates rapidly*See example questions – Page 36*We will be doing 6 ethical exercises

involving the professional selling profession

Factors influencing ethical Factors influencing ethical behaviorbehavior

Note: Exhibit 2.2. and 2.3 in text (Page 37)Factors affecting Ethical Behavior of

salespeople:

Salesperson (Personal) ObjectivesCompany objectives

Customer Objectives

Factors influencing ethical Factors influencing ethical behaviorbehavior

*positive ethical climate highly correlated to job satisfaction, commitment, & low turnover among employees

Values of significant others play a critical role in shaping values. Be careful who you associate with!!

Some studies show politicians, preachers, and professors are more unethical than salespeople!!

A Personal Code of EthicsA Personal Code of Ethics

Develop an individual standard of conduct – Line in the sand!

If you disagree with the firm’s stance on ethical issues you can: 1) Ignore personal values and do what the company asks

2) Take a stand and tell your employer what you think

3) Refuse to compromise your principles

Checklist For Making Ethical DecisionsChecklist For Making Ethical DecisionsP. 36 – Exhibit 2.5P. 36 – Exhibit 2.5

Relationships with CustomersRelationships with Customers

Deception

• Deliberately presenting inaccurate information

• “White lies”

Bribes, Gifts, and Entertainment Bribes- payments made to buyers to influence their purchase

decision Kickbacks- payments made to buyers based on the amounts of

orders placed

Special Treatment

• Taking advantage of their status

ContinuedContinued

Confidential Information

• Disclosing confidential information can be hazardous to the level of customer trust with the salesperson

Back-Door Selling

• Occurs when salespeople ignore the purchasing agent’s policy, go around his or her back, and contact other people directly involved in the purchasing decision

Relationships with companyRelationships with company

See exhibit 2.6 & 2.7 – P-41– Doctors’ and Buyers’ views of ethical behavior

Relationship’s with the Salesperson’s Relationship’s with the Salesperson’s CompanyCompany

Expense Accounts

• Incurred expenses are necessary

• Should not take advantage of the account for personal gains

Reporting Work-Time Information and Activities

• Employees are expected to work Solution: Daily call reports

Switching Jobs

• Give ample notice

• Offer assistance during the transition phase

• Don’t burn your bridges

• Don’t take anything that doesn’t belong to you

Relationships with Relationships with Company/Colleagues/CompetitorsCompany/Colleagues/Competitors

Sexual Harassment

• Includes unwelcome sexual advances, requests for sexual favors, jokes or graffiti, and physical conduct

• Quid Pro Quo

• Hostile environment

Taking Advantage of Other Salespeople

• Unethical when salespeople are too aggressive in pursuing their own goals at the expense of their colleagues

Legal IssuesLegal Issues

Statutory law- based on legislation passed either by state legislatures or by Congress

Administrative laws- established by local, state, or federal regulatory agencies

Common law- grows out of court decisions

Uniform Commercial Code & SaleUniform Commercial Code & Sale

Legal guide to commercial practice in the United States Note following terms: Agent- a person who acts in place of his or her company -

has the authority to legally obligate their firm in a business transaction

Sale - the transfer of title to goods by the seller to the buyer for a consideration known as price

Contract to sell- anytime a salesperson makes an offer and receives an unqualified acceptance

Title & Risk of LossTitle & Risk of Loss

Invitation To Negotiate- sales presentation Offer- salesperson quotes specific terms Orders- written offers that become contracts when they

are signed by an authorized representative in the salesperson’s company

Title and Risk of Loss FOB (free on board) destination- seller has title until the

goods are received at the destination -any loss or damage incurred during transportation is seller’s responsibility

FOB factory-the buyer assumes this responsibility & risk

Relationships (Continued)Relationships (Continued) Oral Vs. Written Agreements

• oral agreements just as binding as written agreements

• written agreements are required for sales over $500

Obligations and Performance

• once there is an agreement of terms both firms must perform according to those terms in “good faith”

Warranties an assurance by the seller that the products will perform as

presented Express warranty- oral or written statement by the seller Implied warranty- not actually stated but is still an obligation

defined by law

Misrepresentation or Sales PufferyMisrepresentation or Sales Puffery

Sales puffery involves opinions with glowing descriptions (Ex.- “Our service can’t be beat”)

Misrepresentation involves misrepresentation of facts and warranties

(Ex.-”Our system will reduce your inventory by 40%”)

False Claims ActFalse Claims Act

Also known as the Lincoln Law, passed in 1863

Purpose – To prevent fraudulent claims by contractors and protect citizens against false claims. A person bringing a fraud claim may share in damages if contractor is found guilty!

MisrepresentationMisrepresentation

Credulous Person Standard – P.48

• a company and the salesperson have to pay damages if a reasonable person could misunderstand the statement

Illegal Business PracticesIllegal Business Practices

Sherman Antitrust Act – 1890Clayton Act – 1914Federal Trade Commission Act – 1914Robinson-Patman Act – 1934

ALL prohibit unfair business practices

that may reduce competition

Illegal Business PracticeIllegal Business Practice

Business Defamation occurs when a salesperson makes unfair or untrue statements to

customers about a competitor, its products, or its salespeople

Reciprocity a special relationship in which two companies agree to buy

products from each other – illegal if forced

Tying Agreements a buyer is required to purchase one product in order to get

another product – typically illegal, not always

Illegal Business PracticesIllegal Business Practices

Conspiracy and Collusion Conspiracy- an agreement between competitors before

customers are contacted Collusion- competitors working together while the customer is

making a purchase decision

Interference with Competitors Illegal interference may occur when: 1) Trying to get a customer to break a contract with a

competitor 2) Tampering with a competitor’s product 3) Confusing a competitor’s market research by buying

merchandise from stores

Restrictions on ResellersRestrictions on Resellers

Resale Price Maintenance – legal for manufacturers, wholesalers, retailers and resellers to set minimum prices

Do not have to sell to everyone

Can offer Spiffs – incentives to push products – legal if everyone agrees

Privacy Laws & Privacy Laws & Do-Not-Call LawDo-Not-Call Law

Must notify consumers about use of their information

European laws are more strictDo-Not-Call Law applies if you are NOT

already a customerRules do not apply to business phones

International Ethical & Legal IssuesInternational Ethical & Legal Issues

Lubrication – involves small gifts & money to help make the sale

Subordination – involves larger sums of money to high ranking officials illegal or ignore an illegal act. Even in countries where bribery is common, it is still considered unethical

Resolving Cultural DifferencesResolving Cultural Differences

Cultural Relativism – view that no culture’s ethics are superior

Ethical Imperialism – view that your country’s standards should be applied worldwide. See P. 52 for examples

Foreign Corrupt Practices Act – illegal for U.S. companies to pay bribes to foreigners

Selling Yourself!!Selling Yourself!!

Four key points – learn all in this class!

*Attitude

*Appearance

*Oral communication skills

*Written communication skills

Ethical Example In Class Ethical Example In Class Designed To Make You…Designed To Make You…

THINK

Article: “How To Make The Sale And Article: “How To Make The Sale And Remain Ethical”Remain Ethical”

Why we have unethical behavior: Lack of teaching Learn from media (not good) Influence of immediate supervisor Pressure to reach objectives

Why is ethical behavior difficult to practice: Adherence to strict chain of command Must be communicated and reinforced