LEGAL AND ETHICAL ISSUES IN RETAILING

Presented by:Tushar Sawhney & Arunoday Singh

LEGAL & ETHICAL BEHAVIOR IN RETAILING

In view of the competitive nature and dynamic environment within which retail operates, it is important to monitor the legal and ethical constraints affecting the sector.

LEGAL & ETHICAL BEHAVIOR IN RETAILING

Major Federal Laws Pricing constraints Promotional constraints Product constraints Channel constraints

PRICING CONSTRAINTS Horizontal price fixing This occurs when a group of competing

retailers (or other channel members, i.e. within the horizontal or vertical distribution levels) establishes a fixed price at which to sell certain offerings.

PRICING CONSTRAINTS

Vertical price fixing This occurs when a retailer collaborates

with the manufacturer or wholesaler to resell an item at an agreed-on price.

PRICING CONSTRAINTS

Predatory pricing This occurs when a retail chain charges

different prices in different geographic areas (e.g. another state) to eliminate/fight competition in that state.

The case of prices of goods in New York and DC (e.g. Sears, Macys etc.).

PROMOTIONAL CONSTRAINTS

Retail promotion decisions are constrained by two major pieces of federal legislation (a) the FTC Act and (b) the Wheeler-Lea Amendment. These are meant to prevent unfair trade practices.

These refer to deceitful diversion of patronage (falsehoods about other competitors), deceptive advertising, and deceptive sales practices.

State and Local Laws

Zoning : Zoning laws or ordinances define and restrict how you can use your business property. Typically, zoning restricts land use by type of use, height of the structures on the property and position or location of the structures on the property

Unfair Trade Practices : The law seeks to protect the economic, intellectual, and creative investments made by businesses in distinguishing themselves and their products.

Building Codes : It is a set of rules that specify the minimum acceptable level of safety for constructed objects such as building.

Franchise Laws : Primarily a franchise agreement is a contract between the franchisor and the franchisee.A franchise include a contract whereby the owner of a business grants to another person permission to carryon a particular business using the grantor's know-how and trade mark as the grantee's own business.

LEGAL AND ETHICAL BEHAVIOR IN RETAILING

Other Laws Mergers/Acquisitions Trade Agreements Human Resources Taxes and SEC (Securities & Exchange

Commission) regulations

Acts related to retailingAll the following statutory provisions related to following acts are applicable to retail industry

Registration Act Indian Stamp Act Easement Act Shops And Establishment Act

Registration Act

The main purpose for which the Act was designed was to ensure information about all deals concerning land so that correct land records could be maintained. The Act is used for proper recording of transactions relating to other immovable property also. The Act provides for registration of other documents also, which can give these documents more authenticity. Registering authorities have been provided in all the districts for this purpose.

Indian Stamp Act

The basic purpose of Indian Stamp Act, 1899 is to raise revenue to Government. However, over a period of time, the stamped document has obtained so much value that a ‘stamped document’ is considered much more authentic and reliable than an un-stamped document.

Easement Act The law relating to easements is governed by the Easements

Act, 1882 (“Easements Act”). The right of easement is derived from the ownership of property and has been defined under the Easements Act to mean a right which the owner or occupier of land possesses for the beneficial enjoyment of that land and which permits him to do or to prevent something from being done in respect of certain other land not his own. Under this law an easement may be acquired by the owner of immovable property, i.e. the “dominant owner”, or on his behalf by the person in possession of the property. Such a right may also arise out of necessity or by virtue of a local custom.

Shops and Establishment Act

The Company operating retail stores is governed by the various Shops and Establishments Acts as applicable in the states where it has stores. These acts regulate the conditions of work and employment in shops and commercial establishments and generally prescribe obligations in respect of inter alia registration, opening and closing hours, daily and weekly working hours, holidays, leave, health and safety measures and wages for overtime work

FDI IN RETAILAccording to Indian law and provisions of company law, there are two ways in which FDI is approved.

Firstly, the Reserve of Bank of India can sanction approval. Secondly, the Foreign Promotion Board can sanction approval. In both cases, there are strict guidelines and conditions regarding the same.