Legal & ethical issues in retailing

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Legal & Ethical Issues in Retailing

Legal & Ethical Issues in RetailingISSUES ABOUT ETHICS IN RETAILING

Issues in retailing are divided into two broad categories viz.

Ethical issues:

This is a set of rules for human moral behavior.

Explicit code of ethics: Written policy that specifies what is ethical and unethical behavior.

Implicit: Unwritten but well understood set of rules/ standards of moral responsibilities.

B) Legal issues

Set of laws that dictate which activities society has deemed to be clearly wrong.

Activities for which retailers & their employees will be punished through federal or state legal system.

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.

Ethical codes vary from country to country. In Middle Eastern Countries bribe is an accepted practice, but is unethical and even illegal in US.

Ethical Behavior in the Retailer-Employee Relationship

Without my clients having the confidence and knowledge of my moral and ethical standards, I doubt that I would have been able to create a solid client base. ~Eric Pollack MD of ESPprosearch

5Page 31Misuse of Company Assets

Employees must understand that ethical behavior is demonstrated not only in how they act toward others but also in how they treat property that doesn't belong to them. The key to success is in understanding who owns what & what boundaries exist for its use.

Employee TheftEmployee Theftfrom a retail store is a term that is used when an employee steals merchandise, food, cash, or supplies while on the job.It is one of the most common crimes.There are people & groups who make their living from shoplifting, who tend to be more skilled.

Misrepresentation of promotional information.

Consumer FraudThe defrauding of a consumer of various products and services which do not perform as advertised, or overcharging or levying hidden charges through deceptive business practices.

Occurs when a retailer makes false or misleading advertising claims about the physical makeup of a product, the benefits to be gained by its use, or the appropriate uses for the product.

Occurs when a retailer represents that merchandise is made by a firm other than the true manufacturer. (Palming Off)

Ethics policy for Motorola salespeopleImproper use of company funds and assets. The funds and assets of Motorola may not be used for influential gifts, illegal payments of any kind or political contributions whether legal or illegal. The funds and assets of Motorola must be properly & accurately recorded on the books & records of Motorola.

Customer supplier/government relationships Motorola respects the confidence of its customers, Motorola respects the laws, customs and traditions of each country in which it operates but, in so doing, will not engage in any act or course of conduct that may violate law or business ethics. Employees of Motorola shall not accept payments gifts, gratuities or favors from customers or suppliers.

Conflict of interest

A Motorola employee shall not be a supplier or a competitor of Motorola or be employed by a competitor, supplier, or a customer of Motorola.

Shall not have a relationship with any other business enterprise

Relationships with CustomersDeceptionBribes, Gifts and EntertainmentSpecial TreatmentConfidential InformationBackdoor Selling

Deliberately presenting inaccurate information, or lying, to a customer is illegal.Bribes : payments to buyers to influence decisions.This special service can reduce the salespersons productivity. Disclosing confidential information gives a bad reputation (untrustworthy) to the salesperson.Some companies do not allow, therefore, Backdoor selling can be very risky and unethical.11Legal Consideration- Site Location

Legal issues discussed here, can discourage a retailer from having a particular location.Environmental issues:

Two environmental issues have received particular attention in recent years.Above ground risks such as asbestos containing materials or lead pipes used in construction.Hazardous materials stored in the ground- This consideration is important for dry cleaner because of the chemicals it uses or for an auto repair shop because of its disposal of used motor oils and battery fluids.

Retailer while purchasing have two options to protect themselves from these hazards:Buy insurance that protect them from such risks.To stipulate in lease that lessor will be responsible for removal of any such material if it is found

2) Zoning , Building Codes & SignsZoning determines how a particular site can be used.Some sites are for residential use only, other are zoned for retail uses.Building Codes determine type of building, size, sign and type of parking lot used at a particular location.Restriction on the use of sign can also impact site selection

Adobe style (Mud bricks) of building in Mexico

Legal & regulatory Issues in HRM

1) Equal Employment OpportunityGoal of Equal Employment Opportunity regulation is to protect employees from unfair discrimination in the workplace.Companies cant treat employees different on the basis of their race, color, national origin, locationIllegal discrimination refers to actions of employees that results in members of a protected class (members that share same characteristics as defined by the law) being treated entirely different than others.

2) Compensation

Laws relating to compensation define 40 hour work week, pay rate for working overtime, minimum wage and pension plans, same pay to men & women for same work.Wal-Mart's CaseTo avoid such discrimination various rules and regulations have been developed to protect employees.

Number or lawsuits were filed against Wal-Mart claiming that they do the same job as hourly employees but are classified as managers so that their employer can avoid paying them overtime wages3) Employee safety & HealthBasic premise of these laws is that the employer is obligated to provide each employee with an environment that is free from hazards that are likely to cause death or serious injury.

4) Employee PrivacyEmployees privacy protection is very limited.

Employer can monitor e-mail & telephone communication, search an employees work space and handbag.

But, employer cant discriminate among employees when undertaking these activities unless they have strong suspicion that specific employee is acting inappropriately.

Ways of unethical advertisementSurrogate advertisementPufferyExaggerationUnverified claimsComparative advertisementsUse of children in advertising

1) Surrogate advertisingIs prominently a case where advertising a particular product is banned by law.In India, though there is a ban on advertising of such products, manufacturers are still able to advertise & remind their brand in many indirect ways, for instance, Manikchand Film Fare Awards, Royal stag Music CDs, Teachers Achievement Awards, etc.

202) Puffery advertisingPuffery as a legal term refers to promotional statements and claims that express subjective rather than objective views, such that no reasonable person would take literally.

A five-year old might believe that man can become chocolate by using AXE, but we know better

3) EXAGGERATIONUsing false claims in the advertisements about the product. For example:-Tide detergent White ho to Tide ho., Vodafone Essar Wherever you go our network follows.

White ho to Tide ho.

One Drop Challenge

Wherever you go our network follows.4) Unverified ClaimsIt includes advertisements of energy drinks which tells us about the number of vitamins and how they help children to grow strong and tall.There is no way of verifying these false claims.For example:-Horlicks, Maltova, Tiger biscuits.

5) Unhealthy Brand comparisons Nowadays advertisers are engaged in unhealthy brand comparison with the help of advertising.Such comparisons create problems and confusions for the right choice of the product as far as audience are concerned.Example can be cited of Coke Vs Pepsi

6) Children in advertisingChildren are easily persuaded and have a large pull on today's markets, as is known by all advertisers, even ones who do not intend for their products to be consumed by children.

AXE AdvertisementAXE a product of HULVaibhav Bedi had been using AXE Deodorant for the past seven years, but didnt able to grab the girls attention. Axe advertisements suggest that the products help men in instantly attracting women.It proved to be a major marketing and legal embarrassment for HUL that a 26-year-old man filed a case against the company, for cheating and causing him mental suffering. Vaibhav Bedi, the petitioner, also surrendered all his used, unused and half-used deodorant sprays, perfume sticks and, and hair gels to the court, & demanded a laboratory test of the products & narcotics test of the brand managers of Axe

Legal and Ethical Issues for Buying MerchandisePurchase Terms and ConditionsResale Price MaintenanceCommercial BriberyChargebacksCounterfeit MerchandiseExclusive Dealing AgreementsTying Contract

1) Terms of Conditions of PurchaseThe Robinson-Patman Act (Anti-Chain-Store Act)Restricts the prices and terms that vendors can offer to retailersForbid vendors from offering different terms and conditions to differe