Chapter 3
Ethical and Legal Issues in Selling
Learning Objectives
 Develop principles upon which to base ethical behavior.
 Identify the sources of influence on ethics and ethical
behavior.
 Understand your role in maintaining the ethical position
of the organization.
 Discover what loyalty to the company requires in the
event that your employees may be involved in
questionable ethical behavior.
 Recognize the implications of federal and local laws
regarding ethical standards.
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Dr. Ken Blanchard and Dr. Norman Vincent Peale
Authors of
The Power of Ethical Management
 The basic message of their book is simple:
You don’t have to cheat to win!
 “Nice guys may appear to finish last, but usually they
are running in a different race.”
 Cheating, lying, and short-changing the customer on
service may bring a satisfactory profit today, but it is
a sure way to court failure for the future.
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The Ethical Dilemma
Do Honest Salespeople Finish Last?
The Origin of Ethics:
 Legal standards are
enforced by laws and
statutes
 Ethical standards come
from society
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Bases for Ethical Systems
Two Systems to Describe
Ethical Thinking:
1. Deontological uses
specific rules
2. Teleological defines right
and wrong in terms of end
results
 Utilitarian: The greatest good
for the greatest number
 Ethical ambivalence results from learning that everything is
relative
 Are there any moral absolutes?
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Guidelines for Ethical Behavior
 Universal Nature
 The Golden Rule
 Everybody plays by the
same rules
 Truth Telling
 Trust facilitates
cooperation
 Responsibility for one’s
actions
 Don’t blame others for
your problems
 The “victim” mentality
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Influences on a Salesperson’s Ethics
 Company Code of Ethics
 Government action and fear of retribution have convinced more
companies to adopt a code
 Typical issues covered: Expense accounts, gift giving, or unethical
demands by a buyer
 Examples Set by Colleagues and Competitors
 The Bottom Line
 Survival and Profit
 Groupthink
 Peer pressure
 Gamesmanship
 Winning for the sake of winning
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Developing A Personal Code of Ethics
 Responsibility to Self
 Responsibility to the Company
 Accuracy in expense accounts
 Honesty in using time and
resources
 Accuracy in filling out order
forms
 Responsibility to Competitors
 Responsibility to Customers
 Misrepresenting products and
services
 Keeping confidences
 Giving Gifts and Entertaining
Clients
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Operating in a Global Environment
 Some cultures have
different expectations
 Global Rule of Thumb:
 Salespeople should
follow the laws of their
country and the rules of
their company
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Ethics and Job Tenure
Whistle-Blowing
 You may be held legally accountable for inaction
 Recent rulings encourage whistle-blowing
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How the Company Treats the Salesperson
 Some incentives encourage fudging
 Management may not be accessible to help with
ethical issues
 Do control mechanisms exist for:
 Customer complaints?
 Salesperson dissatisfaction?
 Expense accounts?
 Are sales goals impossible?
 Manage the distribution of sales territories fairly
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Sexual Harassment
 Sexual harassment cases filed with the EEOC have
gone up 230 percent over the past decade
Nearly 16,000 complaints per year
 Look for a harassment policy including:
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Company leadership
Immediate complaint investigation
Privacy rights protected
Thorough follow-up
Sensitivity training
Review training for comprehension
Periodic refresher courses
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Ethics as Good Business
Five checkpoints in ethical decision making:
1. Is it legal?
2. Is it fair to all concerned?
3. Would I want someone else to act this way towards
me?
4. How would I explain my actions to someone else?
5. How will it make me feel about myself?
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Remember…
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Legal Issues Facing the Salesperson
 Some legal traps
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Quality below standard specified
Violation of delivery date
Pricing concessions
Incomplete or incorrect instructions
Misrepresentation of product usage
Slandering competitor
Kickbacks to buyers
Charges after the sale
 Laws fall into broad categories
 Monopolistic actions
 Deceptive actions
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Specific Antitrust Laws and Their Sales Implications
 The Sherman Antitrust Act of 1890
 The Federal Trade Commission Act of 1914
 Unfair methods of competition in commerce
 Unfair or deceptive acts or practices
 The Robinson Patman Act of 1936
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Defines price discrimination
Gives FTC the right to limit quantity discounts
Prohibits unfair promotional allowances
Brokerage allowances only go to independent brokers
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Uniform Commercial Code (UCC)
Guidelines For Selling
 Written or verbal offers to sell may be binding
 Financing must be explained clearly and completely
 Salesperson must know legal responsibilities of both
parties
 Warranties and guarantees
 Express warranties are made by salesperson or in writing
 Implied warranties
 Are a result of state law
 Unless a disclaimer is made
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Cooling-Off Law
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