Chapter 2
Ethical & Legal Issues in Selling
Ethics 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 Selling
Exhibit 2.1 – Page 31
Ethics & Partnering
Relationships

*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
behavior

Note: Exhibit 2.2. and 2.3 in text (Page 37)
 Factors affecting Ethical Behavior of
salespeople:
Salesperson (Personal) Objectives
Company objectives
Customer Objectives
Factors influencing ethical
behavior

*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 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 Decisions
P. 36 – Exhibit 2.5
Relationships 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
Continued
•
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 company

See exhibit 2.6 & 2.7 – P-41
– Doctors’ and Buyers’ views of ethical behavior
Relationship’s with the Salesperson’s
Company
•
•
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
Company/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 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 & 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 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)
•
•
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 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 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!
Misrepresentation
Credulous Person Standard – P.48
a company and the salesperson have to pay
damages if a reasonable person could
misunderstand the statement
•
Illegal Business Practices
Sherman Antitrust Act – 1890
 Clayton Act – 1914
 Federal Trade Commission Act – 1914
 Robinson-Patman Act – 1934


ALL prohibit unfair business practices
that may reduce competition
Illegal 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 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 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 &
Do-Not-Call Law

Must notify consumers about use of their
information
 European laws are more strict
 Do-Not-Call Law applies if you are NOT
already a customer
 Rules do not apply to business phones
International 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 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!!

Four key points – learn all in this class!
*Attitude
*Appearance
*Oral communication skills
*Written communication skills
Ethical Example In Class
Designed To Make You…
THINK
Article: “How To Make The Sale And
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