Ethical and Legal Issues in SellingEthical and Legal Issues in Selling

Chapter 3Chapter 3

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Important Questions Important Questions AnsweredAnswered Why do salespeople need to develop their own Why do salespeople need to develop their own

codes of ethics?codes of ethics? Which ethical responsibilities do salespeople Which ethical responsibilities do salespeople

have toward themselves, their firms, and their have toward themselves, their firms, and their customers?customers?

Do ethics get in the way of being a successful Do ethics get in the way of being a successful salesperson?salesperson?

Which guidelines should salespeople consider Which guidelines should salespeople consider when confronting situations involving an when confronting situations involving an ethical issue?ethical issue?

Which laws apply to personal selling?Which laws apply to personal selling?

““Without my clients having the Without my clients having the confidence and knowledge of my confidence and knowledge of my moral and ethical standards, I moral and ethical standards, I doubt that I would have been able doubt that I would have been able to create a solid client base.”to create a solid client base.”

~Eric Pollack~Eric Pollack

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Ethics and Personal SellingEthics and Personal Selling Ethics are the principles governing the Ethics are the principles governing the

behaviour of an individual or a group.behaviour of an individual or a group. These principles establish appropriate These principles establish appropriate

behaviour indicating what is right and behaviour indicating what is right and wrong.wrong.

Difficult to determine what the principles Difficult to determine what the principles are?are?

Ethics/Ethical values vary from person to Ethics/Ethical values vary from person to person, culture to culture, country to person, culture to culture, country to country and from industry to industry.country and from industry to industry.

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Ethics and Partnering Ethics and Partnering RelationshipsRelationships Ethical principles are particularly Ethical principles are particularly

important in personal selling.important in personal selling. Partnerships between buyers and sellers Partnerships between buyers and sellers

cannot develop when salespeople behave cannot develop when salespeople behave unethically or illegally.unethically or illegally.

These become increasingly important as These become increasingly important as firms move to strategic partnerships.firms move to strategic partnerships.

Manipulation eliminates or reduces the buyer’s choice unfairly.

Persuasion is trying to influence the buyer’s decision, not force it.

VS

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Factors Influencing the Factors Influencing the Ethical Behaviour of Ethical Behaviour of

SalespeopleSalespeople

Factors Affecting Ethical Factors Affecting Ethical Behavior of SalespeopleBehavior of Salespeople

Factors influencing the ethical Factors influencing the ethical behavior of salespeoplebehavior of salespeople Personal, company, and customer needsPersonal, company, and customer needs Company policiesCompany policies Values of significant othersValues of significant others LawsLaws A personal code of ethicsA personal code of ethics

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Personal, Company, and Personal, Company, and Customer NeedsCustomer Needs

Often salespeople get into situations Often salespeople get into situations

where there is a conflict between their where there is a conflict between their

and the customers’ interest. The best and the customers’ interest. The best

way out is to rely on their ethical way out is to rely on their ethical

standards and understanding of the standards and understanding of the

laws governing these situationslaws governing these situations

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Conflicting ObjectivesConflicting Objectives

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Company PoliciesCompany Policies

Company policies help salespeople Company policies help salespeople

and customer understand the does and customer understand the does

and don'ts and avoid and don'ts and avoid

difficult/indecisive situations.difficult/indecisive situations.

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Values of Significant OthersValues of Significant Others

People acquire their values and attitudes about People acquire their values and attitudes about

what is right and wrong from the people they what is right and wrong from the people they

interact with and observe. e.g. relatives and friends, interact with and observe. e.g. relatives and friends,

other salespeople, and their sales managers.other salespeople, and their sales managers.

Sales managers establish the ethical climate in Sales managers establish the ethical climate in

their organization through the salespeople they their organization through the salespeople they

hire, the ethical training they provide for their hire, the ethical training they provide for their

salespeople, and the degree to which they enforce salespeople, and the degree to which they enforce

ethical standardsethical standards

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LawsLaws

Laws dictate which activities society Laws dictate which activities society

has deemed to be clearly wrong, the has deemed to be clearly wrong, the

activities for which salespeople and activities for which salespeople and

their companies will be punishedtheir companies will be punished

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A Personal Code of EthicsA Personal Code of Ethics

Each salesperson has a sense of right Each salesperson has a sense of right

and wrong - a standard of conduct - from and wrong - a standard of conduct - from

family and friends. Although salespeople family and friends. Although salespeople

should abide by their own codes of should abide by their own codes of

ethics, they may be tempted to avoid ethics, they may be tempted to avoid

difficult ethical choices by developing difficult ethical choices by developing

“logical’’ reasons for unethical conduct.“logical’’ reasons for unethical conduct.

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An Organization’s Main An Organization’s Main ResponsibilitiesResponsibilities

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Guidelines for Ethical Guidelines for Ethical Behavior Behavior

Universal Nature Universal Nature

The golden rule The golden rule

Everyone plays by Everyone plays by

the same rules the same rules

Truth TellingTruth Telling Trust facilitatesTrust facilitates cooperation cooperation

Responsibility for Responsibility for One's ActionsOne's Actions

Don't blame others Don't blame others for your problems for your problems

The "victim" The "victim" mentality mentality

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Checklist for Ethical Checklist for Ethical DecisionsDecisions

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Choices You Can Make if Choices You Can Make if Your Manager Asks You to Your Manager Asks You to

Act UnethicallyAct Unethically When a salesperson views polices or requests of the When a salesperson views polices or requests of the firm as improper, he/she has three choices:firm as improper, he/she has three choices: Ignore personal values and do what company asks to do. Self-Ignore personal values and do what company asks to do. Self-

respect suffers when one has to compromise principles to respect suffers when one has to compromise principles to please an employer. This will probably make the salesperson please an employer. This will probably make the salesperson feel guilty and dissatisfied with the job in the long run. feel guilty and dissatisfied with the job in the long run.

Take a stand and tell the employer what he/she thinks. Try to Take a stand and tell the employer what he/she thinks. Try to influence the decisions and policies of the company and influence the decisions and policies of the company and supervisors.supervisors.

Refuse to compromise his/her principles. Taking this path Refuse to compromise his/her principles. Taking this path may mean that the salesperson will get fired or be forced to may mean that the salesperson will get fired or be forced to quit.quit.

One should not take a job with a company whose One should not take a job with a company whose products, policies, and conduct conflict with your products, policies, and conduct conflict with your standards.standards.

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Selling Ethics and Selling Ethics and RelationshipsRelationships

The salespeople may confront some The salespeople may confront some

ethical situations in their ethical situations in their

relationships withrelationships with CustomersCustomers CompetitorsCompetitors Other colleagues (other salespeople)Other colleagues (other salespeople)

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Relationships with Relationships with CustomersCustomers

DeceptionDeception

Bribes, Gifts and EntertainmentBribes, Gifts and Entertainment

Special TreatmentSpecial Treatment

Confidential InformationConfidential Information

Backdoor SellingBackdoor Selling

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DeceptionDeception

Deliberately presenting inaccurate Deliberately presenting inaccurate

information, or lying, to a customer is information, or lying, to a customer is

illegal.illegal.

However, misleading customers by However, misleading customers by

telling half-truths or withholding telling half-truths or withholding

important information is a matter of important information is a matter of

ethics.ethics.

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Bribes, Gifts and Bribes, Gifts and EntertainmentEntertainment

Bribes : payments to buyers to influence Bribes : payments to buyers to influence

decisionsdecisions

kickbacks : payments made to buyers based on kickbacks : payments made to buyers based on

the amount of orders. Both of these have negative the amount of orders. Both of these have negative

consequences for the purchasing agent’s firm. consequences for the purchasing agent’s firm.

On the other hand determining which gifts and On the other hand determining which gifts and

entertainment activities are acceptable and which entertainment activities are acceptable and which

are not brings up ethical issues.are not brings up ethical issues.

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Special TreatmentSpecial Treatment

Some customers take advantage of Some customers take advantage of their status to get special treatment their status to get special treatment from salespeople, which may upset from salespeople, which may upset other customers who do not get the other customers who do not get the special attention. This special service special attention. This special service can reduce the salesperson’s can reduce the salesperson’s productivity. Therefore, salespeople productivity. Therefore, salespeople should be diplomatic but careful should be diplomatic but careful about undertaking requests to provide about undertaking requests to provide unusual servicesunusual services

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Confidential InformationConfidential Information

Offering information about a customer’s Offering information about a customer’s

competitor in exchange for an order is competitor in exchange for an order is

unethical. Long-term relationships can unethical. Long-term relationships can

develop only when customers trust develop only when customers trust

salespeople to maintain confidentiality. salespeople to maintain confidentiality.

Disclosing confidential information gives a Disclosing confidential information gives a

bad reputation (untrustworthy) to the bad reputation (untrustworthy) to the

salesperson.salesperson.

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Backdoor SellingBackdoor Selling

Sales to ultimate consumers Sales to ultimate consumers

bypassing the middlepersons or A bypassing the middlepersons or A

salesperson's practice of avoiding a salesperson's practice of avoiding a

purchasing agent. Some companies do purchasing agent. Some companies do

not allow, therefore, not allow, therefore, Backdoor selling Backdoor selling

can be very risky and unethical.can be very risky and unethical.

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Buyers’ View of Unethical Buyers’ View of Unethical Sales BehaviourSales Behaviour

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The Tree of Business LifeThe Tree of Business Life

IT C

TT T

T T T TT T T T

Ethi

cal Service

Builds

T r

u e

Relationships

The Tree is rooted inThe Tree is rooted in Integrity: being honest Integrity: being honest

and without compromise and without compromise or corruptionor corruption

From integrity flows From integrity flows confidence that one can confidence that one can trust the othertrust the other

Integrity and trust form Integrity and trust form the attributes often the attributes often referred to as characterreferred to as character

Framed byFramed by Ethical Service that Ethical Service that

Builds True RelationshipsBuilds True Relationships Shown with T’s standing Shown with T’s standing

forfor Truth: facts needed to Truth: facts needed to

make ethical and moral make ethical and moral decisionsdecisions

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Relationships with the Relationships with the Salesperson's CompanySalesperson's Company

Sales people in the field cannot be Sales people in the field cannot be monitored. Companies trust the monitored. Companies trust the salespersons and the professional salespersons and the professional salespersons do not abuse this trust. Still salespersons do not abuse this trust. Still there could be problems between the there could be problems between the salesperson and the company:salesperson and the company:

Expense AccountsExpense Accounts Reporting Work-time Information & ActivitiesReporting Work-time Information & Activities Switching JobsSwitching Jobs

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Expense AccountsExpense Accounts

Many companies provide their Many companies provide their salespeople with cars and reimburse them salespeople with cars and reimburse them for travel and entertainment expenses. It is for travel and entertainment expenses. It is good to have policies to be able to treat all good to have policies to be able to treat all the salespersons equally.the salespersons equally.To do their jobs well, salespeople need to To do their jobs well, salespeople need to incur expenses. However, using their incur expenses. However, using their expense accounts to offset what they expense accounts to offset what they consider to be inadequate compensation is consider to be inadequate compensation is unethical.unethical.

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Reporting Work-time Reporting Work-time Information & ActivitiesInformation & Activities

Salespersons are expected to work full Salespersons are expected to work full time. Some salaried salespersons steal time time. Some salaried salespersons steal time and waste time on coffee breaks, long and waste time on coffee breaks, long lunches, or unauthorized days off. While lunches, or unauthorized days off. While some salespeople paid by commission cheat some salespeople paid by commission cheat by not working full time. This result in by not working full time. This result in decrease of their income and profit of the decrease of their income and profit of the company.company.

To monitor work activities, many companies To monitor work activities, many companies ask their salespeople to provide daily call ask their salespeople to provide daily call reports.reports.

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Switching JobsSwitching Jobs

As for every professional, when a As for every professional, when a salesperson decides to change the job, salesperson decides to change the job, has some ethical responsibilities like:has some ethical responsibilities like: Give ample notice.Give ample notice. Offer assistance during the transition Offer assistance during the transition

phase.phase. Don’t burn the bridges.Don’t burn the bridges.

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Relationships with Relationships with ColleaguesColleaguesTo be effective, salespeople need to work To be effective, salespeople need to work

together with others. Unethical behaviour together with others. Unethical behaviour

toward their co-workers, such as engaging toward their co-workers, such as engaging

in sexual harassment and taking advantage in sexual harassment and taking advantage

of colleagues, can weaken company morale of colleagues, can weaken company morale

and have a negative effect on the company’s and have a negative effect on the company’s

reputationreputation.

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Relationships with Relationships with CompetitorsCompetitorsMaking false claims about competitors’ Making false claims about competitors’

products or sabotaging their efforts is products or sabotaging their efforts is

unethical and often illegal. This can even unethical and often illegal. This can even

backfire can harm reputation of the backfire can harm reputation of the

salespeople and their companies both. salespeople and their companies both.

Another questionable tactic is criticizing a Another questionable tactic is criticizing a

competitor’s products or policies.competitor’s products or policies.

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ETHICS ETHICS Responsibility

toSelf

your conscience your conscience

              

                       

Responsibilityto

yourCompany

Inaccuracies in Expense Inaccuracies in Expense Accounts Accounts Honesty in Using Time and Honesty in Using Time and Resources Resources Accuracy in Filling Out Order Accuracy in Filling Out Order Forms Forms Representing the Company Representing the Company

Responsibilityto

Competitors

No false claimsNo false claims

Responsibilityto

Customers

Overselling and Overselling and Misrepresenting Products or Misrepresenting Products or Services Services Keeping Confidences Keeping Confidences Gifts & Entertainment Gifts & Entertainment

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Legal IssuesLegal IssuesSalespeople violating the activities Salespeople violating the activities

determined by the society as unethical and determined by the society as unethical and

are often countered by a legal system. This are often countered by a legal system. This

does not only causes problems to does not only causes problems to

themselves but to their companies as well.themselves but to their companies as well.

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Uniform Commercial CodeUniform Commercial CodeUniform Commercial Code (UCC) is theUniform Commercial Code (UCC) is the

legal guide to commercial practice in the Unitedlegal guide to commercial practice in the United

States. The UCC defines a number of termsStates. The UCC defines a number of terms

related to salespeople.related to salespeople.

AgencyAgency SaleSale Title and Risk of LossTitle and Risk of Loss Oral versus written AgreementsOral versus written Agreements Obligations and PerformanceObligations and Performance WarrantiesWarranties

AgencyAgency

Salesperson who is a representative of Salesperson who is a representative of the company, therefore, his/her the company, therefore, his/her statements and actions represent the statements and actions represent the company. These legally bind the company. These legally bind the company and have significant company and have significant financial impact.financial impact.

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SaleSale

The transfer of title to goods by the The transfer of title to goods by the seller to the buyer for a consideration seller to the buyer for a consideration known as price.known as price.

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Title and Risk of LossTitle and Risk of Loss

Understanding the terms of the sale Understanding the terms of the sale and who has title can be useful in and who has title can be useful in resolving complaints about damaged resolving complaints about damaged merchandise.merchandise.

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Oral Versus Written Oral Versus Written AgreementAgreement

In most cases oral and written In most cases oral and written agreements between a salesperson & agreements between a salesperson & a customer are equally binding. a customer are equally binding. Normally, written agreements are Normally, written agreements are required for big transactions. One required for big transactions. One must be careful when signing written must be careful when signing written agreements.agreements.

7.39

Obligations and Obligations and PerformancePerformance

Once the agreement is concluded, Once the agreement is concluded, both firms must perform according to both firms must perform according to those terms in “good faith.’’ Even if those terms in “good faith.’’ Even if salespeople overstate the salespeople overstate the performance of their products, their performance of their products, their firms have to provide the stated firms have to provide the stated performance and meet the terms of performance and meet the terms of the contract.the contract.

7.40

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Is an assurance by the seller that the Is an assurance by the seller that the products will perform as represented. products will perform as represented. Sometimes a warranty is called a Sometimes a warranty is called a guarantee.guarantee.

WarrantiesWarranties

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Misrepresentation or Sales Misrepresentation or Sales PufferyPuffery

MisrepresentationMisrepresentation ““Mechanically, this oil rig is a 9 on a scale of 10.”Mechanically, this oil rig is a 9 on a scale of 10.” ““Feel free to prescribe this drug to your patients, Feel free to prescribe this drug to your patients,

doctor. It’s nonaddicting.”doctor. It’s nonaddicting.” At times salespersons exaggerate performance At times salespersons exaggerate performance

of products. Glowing descriptions are of products. Glowing descriptions are considered as Opinions or Sales Puffery.considered as Opinions or Sales Puffery. ““This is a top-notch product.”This is a top-notch product.” ““This product will last a lifetime.”This product will last a lifetime.”

Factual statements become particularly strong Factual statements become particularly strong indicators of an expressed warranty when indicators of an expressed warranty when complex products are sold to unsophisticated complex products are sold to unsophisticated buyersbuyers

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Illegal Business PracticesIllegal Business Practices Laws are defined and courts use these Laws are defined and courts use these

laws to Create common law that defines laws to Create common law that defines illegal business practicesillegal business practices Business DefamationBusiness Defamation ReciprocityReciprocity Tying AgreementsTying Agreements Conspiracy and CollusionConspiracy and Collusion Interference with CompetitorsInterference with Competitors Restrictions on ResellersRestrictions on Resellers Price Discrimination Price Discrimination

Business DefamationBusiness Defamation

It occurs when a salesperson makes It occurs when a salesperson makes unfair or untrue statements to the unfair or untrue statements to the customer about competitor, its customer about competitor, its products, or its salespeople.products, or its salespeople.

7.44

ReciprocityReciprocity

It is a special relationship in which It is a special relationship in which two companies agree to buy products two companies agree to buy products from each other. These agreements from each other. These agreements are illegal if one company forces the are illegal if one company forces the other one to join the agreement.other one to join the agreement.

7.45

Tying AgreementsTying Agreements

If a buyer is required to purchase a If a buyer is required to purchase a product in order to get another one. product in order to get another one. Such agreements are legal only if it Such agreements are legal only if it could be proved that both the items could be proved that both the items should be used togethershould be used together

7.46

Conspiracy and CollusionConspiracy and Collusion

An agreement between competitors An agreement between competitors before customers are contacted is a before customers are contacted is a conspiracy; while collusion refers to conspiracy; while collusion refers to competitors working together while competitors working together while the customer is making a purchase the customer is making a purchase decisiondecision

7.47

Interference with Interference with CompetitorsCompetitors

Salespeople may illegally interfere Salespeople may illegally interfere with competitors bywith competitors by Trying to get a customer to break a Trying to get a customer to break a

contract with a competitor.contract with a competitor. Tampering with a competitor’s product.Tampering with a competitor’s product. Confusing a competitor’s market research Confusing a competitor’s market research

by buying merchandise from stores.by buying merchandise from stores.

7.48

Restrictions on ResellersRestrictions on Resellers

Numerous laws govern the Numerous laws govern the relationship between manufacturers & relationship between manufacturers & resellers/wholesalers and retailers. resellers/wholesalers and retailers. These laws change with time.These laws change with time.

7.49

Price Discrimination Price Discrimination

A seller price discriminates when it A seller price discriminates when it charges different prices to different charges different prices to different buyers.buyers.

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Legal Guidelines Legal Guidelines To reduce the chances of violating laws governing To reduce the chances of violating laws governing

sales practices, you should adopt the following sales practices, you should adopt the following guidelinesguidelines Be sure that all specific statements about your product’s Be sure that all specific statements about your product’s

performance, such as technical characteristics and useful performance, such as technical characteristics and useful life, are accurate.life, are accurate.

Be sure that all specific positive statements about Be sure that all specific positive statements about performance can be supported by evidence. If you make performance can be supported by evidence. If you make strong positive statements that cannot be supported, use strong positive statements that cannot be supported, use very general wording, such as high quality and great value.very general wording, such as high quality and great value.

If your customers do not pay attention to warnings and If your customers do not pay attention to warnings and operating instructions, remind them to read this operating instructions, remind them to read this information. Never suggest that this information can be information. Never suggest that this information can be ignored.ignored.

If customers contemplate using your product incorrectly or If customers contemplate using your product incorrectly or in an inappropriate application, caution them specifically in an inappropriate application, caution them specifically about how the product should be used.about how the product should be used.

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Assess your customer’s experience and Assess your customer’s experience and knowledge. Your legal obligations are greatest knowledge. Your legal obligations are greatest with unsophisticated customers.with unsophisticated customers.

Don’t make negative statements about a Don’t make negative statements about a competitor’s product, financial condition, or competitor’s product, financial condition, or business practices. Never pass along rumours business practices. Never pass along rumours about competitors. about competitors.

Legal Guidelines Legal Guidelines (Contd.)(Contd.)

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Ethical and Legal Issues in Ethical and Legal Issues in International SellingInternational Selling

Ethical and legal issues are very Ethical and legal issues are very complex when selling in international complex when selling in international

markets. Value judgments and laws vary markets. Value judgments and laws vary widely across cultures and countries. widely across cultures and countries.

Behaviour that is commonly accepted as Behaviour that is commonly accepted as proper in one country can be completely proper in one country can be completely

unacceptable in another country.unacceptable in another country.

International Ethical and International Ethical and Legal IssuesLegal IssuesLubrication…small sums of money or gifts, typically made Lubrication…small sums of money or gifts, typically made

to low-ranking managers or government officials in order to low-ranking managers or government officials in order to get things to happen more quickly.to get things to happen more quickly.Subordination…large payments to higher-ranking officials Subordination…large payments to higher-ranking officials to get them to do something illegal or ignore an legal act.to get them to do something illegal or ignore an legal act.Resolving cultural differencesResolving cultural differences

Cultural relativism…no culture’s ethics are superiorCultural relativism…no culture’s ethics are superior Ethical imperialism…home country’s ethics should be applied to Ethical imperialism…home country’s ethics should be applied to

one’s behavior across the world.one’s behavior across the world.

It is important that the salespersons are aware of the host It is important that the salespersons are aware of the host

as well as their own country when working internationallyas well as their own country when working internationally..

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LEGAL ISSUES FACING THE LEGAL ISSUES FACING THE SALESPERSONSALESPERSON

SomeLegalTraps

Quality below standard specified Quality below standard specified Violation of delivery date Violation of delivery date Pricing concessions Pricing concessions Incomplete or incorrect instructions Incomplete or incorrect instructions Price fixing Price fixing Delivering a different brand than that sold Delivering a different brand than that sold Misrepresentation of product usage Misrepresentation of product usage Kickbacks to buyer Kickbacks to buyer Charges after the sale Charges after the sale Misuse of proprietary data Misuse of proprietary data Signing agreements without the proper Signing agreements without the proper

authorization authorization

Categoriesof

Laws

Antimonopoly Antimonopoly Deceptive actions Deceptive actions Preserve competition Preserve competition

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How to keep out of Legal How to keep out of Legal TroubleTrouble"Puffery" vs. statements of fact. Puffery" vs. statements of fact.

Educate the customer thoroughly before making the Educate the customer thoroughly before making the sale sale Know technical specs, etc. for the product you sell. Know technical specs, etc. for the product you sell. Know your company's literature. Challenge it if is false Know your company's literature. Challenge it if is false Know the terms of sale policies. You can bind the Know the terms of sale policies. You can bind the company company Know federal and state laws regarding your product Know federal and state laws regarding your product and its warranties and its warranties Don't guess at your product's capabilitiesDon't guess at your product's capabilities

Legal and ethical responsibilities of salespeople Legal and ethical responsibilities of salespeople are important because salespeople may face are important because salespeople may face conflicts between their personal standards and the conflicts between their personal standards and the standards of their firms and customers.standards of their firms and customers.Salespeople’s ethical standards determine how Salespeople’s ethical standards determine how they will conduct relationships with their they will conduct relationships with their customers, employers, and competitors.customers, employers, and competitors.Many companies have ethical standards that Many companies have ethical standards that describe the behavior expected of their salespeople.describe the behavior expected of their salespeople.Good ethics are good business.Good ethics are good business.

SummarySummary

End of Chapter 3End of Chapter 3

Thank youThank you