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TO BE COMPLETED BY STUDENT

FULL NAME Daniel Dass A/L Robert Nesakumar

MATRICULATION NO. I15009515

CAMPUS NAME INTI International University

PROGRAMME NAME Bachelor of Business in Business Administration

COURSE CODE AND COURSE MGT 3129

NAME Business Ethics

LECTURER’S NAME
Mr. Mohammad Yazid Bin Bahari

January
SECTION / GROUP 8BA1 SESSION
2016

 ASSIGNMENT 1
 LAB REPORT
DUE 7 March
COURSEWORK DETAILS  PROJECT DATE 2016
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 Journal / Articles

1) Starbucks Accused of Abusing Monopoly Power in Violation of Sherman Act

SEATTLE, Sept. 25 /PRNewswire/ -- An independent specialty coffeehouse owner filed a p

roposed class action lawsuit today against Starbucks Corporation (NYSE: SBUX), claiming
the company, from its monopoly position in the specialty coffee market, engages in a range of
anti-competitive activities aimed at eliminating competition. Filed in U.S. District Court, the s
uit alleges that Starbucks has exploited its monopoly power in the specialty coffee retail mark
et to stifle competition through a series of predatory practices including exclusive lease agree
ments, "cluster bombing" of stores and competitor buy-outs. Among the allegation leveled in t
he complaint, Penny Stafford -- an independent coffee-shop operator – claims that Starbucks
locks out competition through a series of exclusive lease agreements with property managers
of Class A high-rises, preventing other specialty coffee shops from operating in the same
building. In this practice, Starbucks frequently offers to make lease payments higher than fair
market value in exchange for a property owner's agreement to prevent competitors from
leasing space in the same building, the complaint says. In the Seattle and Bellevue markets,
the majority of Class A space is controlled by a handful of Real Estate Investment Trusts
(REITs), making such agreements with Starbucks possible, the suit claims. "We believe
Starbucks has become such a dominating force in the coffee- house segment, it has become a
monopolist," said Steve Berman, managing partner of Hagens Berman Sobol Shapiro and
attorney for Stafford. "We intend to show that as a monopolist, Starbucks is abusing their
market power to the detriment of its competitors, and to consumers. “We contend that
Starbucks' market practices are more about destroying competition than pouring a good cup
of coffee,” Berman added.

According to published reports, Starbucks controls 73 percent of the specialty coffeehouse

market. "Fair, even bare-knuckle competition is one thing, but we believe Starbucks has
repeatedly crossed the line in denying competition the chance to go toe-to-toe with them,
“said Berman. Stafford, owner of Belvi Coffee and Tea Exchange Inc., tried to enter the
specialty coffeehouse business by seeking retail spaces located in Seattle and Bellevue's Class
A high-rise office buildings, but her entry was repeatedly blocked despite consumer demand
in these locations, the suit claims. Berman says the lease agreement tactic is just one of a
myriad of anti - competitive steps Starbucks uses to avoid fair competition. According to the
complaint, Starbucks also participated in predatory actions when Stafford was finally able to
obtain Class A retail space in May 2005. "Once I found a way into a Class A building, it was
obvious to me that Starbucks decided I had to go," said Stafford. "The nearest Starbucks was a
round the corner, but they continually sent employees loaded with free drink samples to stand
in front of my shop, drawing away customers." Starbucks' campaign lasted for months, and
eventually led to the store's closing, according to Stafford. The complaint cites a number of
other predatory tactics used by Starbucks, including reports in which Starbucks offers to buy
out competitors at below- market prices, and threatens to open stores nearby if the offer is
rejected. The complaint also cites instances in which Starbucks uses its huge financial power
to purchase other independent providers in an effort to squash any presence of independent
coffee purveyors. For example in 2003 Starbucks purchased Seattle Coffee Company
acquiring Seattle's Best Coffee and Torrefazione Italia for $72 million, which boasted 22
Seattle's Best Coffee and five Torrefazione Italia stores in the greater Seattle area. Starbucks
then closed all the Torrefazione stores, and more than half of the SBC stores. "It is clear to us
that Starbucks' game plan is to completely dominate a market by forcing out competition,
something they've done quite well in the Seattle area," Berman added. "We also believe that
this scorched-earth approach is happening in many other major markets across the U.S."

The suit is asking the court to end what it claims are anti-competitive activities and seeks to
represent coffee shop owners who seek to occupy retail space in commercial office buildings
in Seattle or Bellevue.

According to Berman, he has heard from other coffeehouse owners across the country who
are experiencing the same treatment, and could expand the suit to include them sometime in
the near future. Starbucks currently sells approximately four million coffee drinks daily in the
U.S. alone. With more than 1,200 stores expected to open this year, the company continues to
grow into a global empire. Its long-term goal is to have over 15,000 U.S. stores and 30,000
stores worldwide.
 2) Ford Being Sued for Using Faulty F-Series Fuel

According to the legal paperwork, New Jersey-based Coba Landscaping and Construction Inc.
is suing Ford Motor Company because Ford F Series pickups and E Series full sized vans sold
between 1999 and 2008 were supposedly built with fuel tanks that had faulty linings. Over
time, these linings would deteriorate and fall apart; with the loose particles of rust finding their
way into the fuel lines and fuel filters. Once enough of this crud would build up in the fuel
system, it would cause the truck or van to buck or suddenly stall.
The lawsuit paperwork goes on to state that Ford Motor Company issued a “secret” technical
service bulletin to dealerships about the possible F Series and E Series fuel tank problems but
there was never any official recall or offer to fix the problem. The complaint insists that
“hundreds, if not thousands” of people were affected by this issue.
The exact monetary figure being sought by the plaintiffs has not been disclosed but the lawsuit
states that the suing party seeks “compensatory, punitive and triple damages” for fraud, breach
of warranty and unjust enrichment. For those not familiar with that last term, unjust enrichment
is when one party is being sued for benefiting essentially through wrongdoing towards another
party. In this case (again in theory, according to the lawsuit), Ford Motor Company profited
from selling faulty trucks and not incurring the expenses of a recall – so they have made money
unjustly. The fraud charge likely relates to the idea that Ford knew about the problem but did
nothing about it and the breach of warranty portion of the lawsuit is pretty self-explanatory.
A portion of the Ford F Series trucks and E Series vans possibly included in this lawsuit of
Coba et al v. Ford Motor Company have been involved in a fuel tank recall but that related to
the fuel tank straps rusting and failing in areas where lot of salt is used to fight ice on winter
roads. It will be interesting to see how this case pans out, as if the federal court finds that Ford
has indeed failed to handle this alleged fuel tank issue properly, it could cost them in more than
one way.
The Ford F Series has been the bestselling vehicle in the US market for a long time – including
the years name in the lawsuit. If the plaintiffs in this class action suit are awarded money, it
could get to be a very, very expensive case for Ford Motor Company. Also, if the courts rule
in favor of the plaintiffs, you have to wonder if the NHTSA might begin looking into the
problem themselves. If they find that there is indeed an issue with the fuel tanks that can lead
to stalling on the open road, there could conceivably be a recall for what would likely be well
over a million trucks and full sized vans.
 3) Adidas – Kangaroo’s Killed for Sport

Each year, millions of kangaroos are killed in what is widely regarded as the largest wildlife
massacre on the planet. This includes around a million baby kangaroos (joeys)
annually. Shockingly, one of the largest supporters of this barbaric trade are sports shoe
manufacturers, who purchase the skins and turn them into football boots. Adidas, one of the
industry’s biggest customers, is a major driving force behind the industry - as are Nike, Puma
and Umbro. As of 2011, all four still make boots made from kangaroo leather.

In 2006, David Beckham, who is paid millions of pounds to promote Adidas products switched
to synthetics after years of wearing kangaroo football boots. This was, in part, due to Viva!'s
campaign. However, despite Beckham's change of heart Adidas continues to make many other
football boots out of kangaroo leather. Back in July 2002 Viva! was leaked an email sent out
by John Kelly, spokesperson for the Kangaroo Industry Association of Australia, which stated:
“This (soccer boot) industry is vital to the kangaroo industry. Without it underpinning
kangaroo skin prices the entire industry would be at risk. Adidas have received to date
over 10,000 emails complaining about their use of kangaroo leather...and are obviously
concerned about damage to their image."

This is proof that Adidas - and the other companies using kangaroo skin are responsible for the
violent and unnecessary deaths of adult kangaroos and their baby joeys - all for the sake of a
sports shoe! There is no excuse for Adidas to continue supporting an industry that causes so
much suffering. The original designer of the Predator boot, ex-Liverpool player Craig Johnston,
has publically stated: "The original model [of the Predator] was an all-rubber shoe.
Synthetics, rubbers and new materials are definitely the future of football boots. I don’t
agree with killing kangaroos."

There are modern, hi-tec synthetic fabrics available which Adidas could switch to right now.
The fact that Adidas' own Beckham version of the Absolute Predator was subsequently made
from synthetics dispels the myth once and for all that top football players won't wear synthetics!
Ronaldo - arguably the best football player in the world - wore a boot which is made of 100
per cent synthetic materials. If boots made from synthetic materials are good enough for
Ronaldo (and now David Beckham) then Adidas has no excuse for not using them too!

Thankfully, Adidas appear to be starting to agree with us, as currently none of their predator
range is currently made from kangaroo leather (2011)! The kangaroo industry have also said
that football boot manufacturers are distancing themselves from the trade: AgForce macropod
committee spokesman Stephen Tully (quoting a kangaroo shooter) said: “Traditionally
shooters had a fallback market of shooting for skins but Mr. Newton said that market
was no longer viable after major manufacturers such as Adidas moved away from using
kangaroo leather in response to public pressure from animal rights activists."

However, Adidas and the other football boot manufacturers are not yet 100 per cent kangaroo-
free – as they all still use kangaroo leather in some of their boots. They are all well aware of
the cruelty behind the kangaroo industry. Viva! has written to them on countless occasions,
sent them harrowing video footage of a kangaroo hunt, presented them with a report into
cruelty in the commercial kangaroo industry (based on evidence collected by the Australian
RSPCA) but still they fund the kangaroo massacre. By continuing to use kangaroo-skin,
Adidas, Nike, Umbro and Puma are showing themselves to be devoid of compassion and ethics.
Their kangaroo leather football boots are leaving a trail of blood in the outback. Viva! is calling
for an international boycott of all Adidas, Nike, Umbro and Puma products.
 1) Starbucks Accused of Abusing Monopoly Power in Violation of Sherman Act

Starbucks is has over the years established itself as the leading coffee company in the world. It
has 23,450 stores worldwide and its growth is expected to increase rapidly in the upcoming
years. In the United States alone it has 12,937 stores. This has caused the closure of numerous
smaller coffee shops to shut down because of their inability to keep up with the competition
from Starbucks. However, Starbucks had to face a lawsuit charged against them due to their
use anti-competitive tactics against their competitors. The tactics that Starbucks resorted to
were by having their employees hand out samples of their product without charge outside the
shops of its competitors. In this sense, Starbucks would have nothing to lose as it will be able
to eliminate its competitors within the vicinity and also rake in profits. In addition to this tactic,
Starbucks tried to buyout the property of its competitors. They deployed this tactic by signing
property leases for 3 times the actual market value to gain the favor of the landlords. This would
ensure that they are able to buy out any property from its competitors. Based on the case study,
Penny Stafford an independent coffee-shop operator from Seattle had been running her shop
for 25 years. However, when she wanted to renew the lease on the shop the property owner
declined to allow her the extension. After she had left her 25 year old business, it turned out
that the new renters was Starbucks. From this it can be concluded that Starbuck was doing all
they could with their financial power to wipeout any competitors that seemed to be a threat.
This was one of the core reasons regarding the lawsuit that was filed against Starbucks.

Based on the three main ethical theories which are the Utilitarian theory, the Kantian theory
and the virtue theory, Starbucks actions and procedures would be considered unethical.
Utilitarianism is a form of consequentialism, which states that the consequences of any action
are the only standard of right and wrong. The Kantian theory states that the rightness or
wrongness of actions does not depend on their consequences but on whether they fulfill our
duty. The virtue theory emphasizes the virtues, or moral character, in contrast to the approach
which emphasizes duties or rules or that which emphasizes the consequences of actions. Based
on the utilitarianism theory, Starbucks use of their negative tactics is considered unethical
because a small local coffee shop can offer more to the people who reside around that area
compared to what Starbucks can offer. Starbuck has established itself as one of the best or if
not the best coffeehouse chain globally. The quality of their products is unmatched. However,
the cost of a cup of coffee can be a huge distress on some customers. For example, a regular
customer who has been getting their coffee at the local coffee store would now have to pay
double the price for their favorite cup of coffee. It is undeniable that Starbucks has established
a strong customer base due to its product quality and impeccable service. However, it would
not be fair to a customer who has been paying half the price for a cup of coffee to now pay
double the price at Starbucks. Moreover to some customers, the local coffee shops can be a
place where they hang out and meet their friends. Most local coffee shop owners would
eventually establish a friendship with their customers. At Starbucks, most employees are high
school or college students who work part time to pay their bills. Most of them would leave after
a certain period of time. If Starbucks wants to monopolize an area, they should also consider
the smaller coffee shops because that could the only source of income for the local coffee shop
owners.

Next, based on the Kantianism theory, Starbuck’s actions are considered unethical because
they are being selfish by disregarding the local coffee shops in order to gain profit. As
mentioned above, Starbucks has a massive range of customers in its books. Their customer
base will keep expanding rapidly in the future. However, it is simply unethical for them to run
out a local coffee shop in order to gain a certain number of customers in an area. In this
situation, Starbucks has lost its focus on customer value. They treat their customers as a means
to make more money and not as valuable people. Their monopolizing techniques are wrongly
motivated.

Thirdly Starbucks actions are considered unethical under the virtue theory due to their rapid
expansion of stores in a short period of time in order to ensure it is able to eliminate its smaller
competition quickly. Also Starbucks, acted unethically because they used their financial power
to pay their way in order to be the only coffee shop in the vicinity. Starbucks need to change
their method of doing business and consider the effects on the lives of others. They are already
a global business company which will only keep growing. They need not ruin the lives of small
coffee store owners by trying to monopolize any are they want.

854 WORDS
 2) Ford Being Sued for Using Faulty F-Series Fuel

As of today, Ford Motor Company is the fifth biggest automobile company in the world today.
It is an American automobile company founded in 1903 by Henry Ford. Today is has 199,000
employees under its name and a $ 149.5 billion revenue. Over the years since its foundation,
Ford has built its reputation due to its ability to produce quality cars and trucks. However, just
like most companies Ford has also made mistakes which has caused its reputation to take a
downfall. Ford came under scrutiny due to the lack of responsibility they had in making amends
to the situation. Beginning from the year 1999 up to 2008, Ford’s F-series pickup trucks and
E-series van used a coating to seal the inside of the vehicle’s fuel tanks. This coating would
flake off the tank. This caused the fuel system to get clogged and also prevented fuel from
getting to the engine. The result of this was the engine caused the vehicle to stall or stumble
which would put the drive in a dangerous situation while driving. However when Ford came
to know of this issue in 2007, they sent out a personal memo to all their dealerships informing
them of the situation whilst instructing them to remain silent regarding this issue to the
customers. Also, should any customers affected by this situation want to repair their vehicle,
standard charge fees will be issued. However in March 2012 a law suit was filed against Ford
Motors regarding the flaking fuels tanks. Too many customers had been facing the same
problem which led to the exposure of Ford unethical tactics.

Due to the large number of customers that has been affected by this issue, four major ethical
theories would be used to analyze and determine Ford’s decision in this matter. The first major
theory is the individualism theory. Based on this theory, we can understand that Ford’s main
focus was to maximize profit while shying themselves from the problem at hand. The fact that
they kept the faulty gas tank a secret is considered unethical. By Ford hiding the fact of their
usage of faulty gas tank would not make the company and profit. Ford would only be on the
losing side as they will lose money by having to pay the legal fee as well as the cost of repairing
the vehicles. Ford gains absolutely nothing by hiding from the issue for the company nor the
stakeholders. Based on an individualistic standpoint, Ford’s decision to withhold information
was unethical.

Based on the next theory which is the utilitarian theory, Ford actions would also be considered
unethical. The utilitarian theory is focused on maximizing the overall good for the greatest
number, which basically means making everyone affected by the situation happy. All that Ford
brought to the affected parties were unhappiness. Ford themselves were affected by their own
mistakes as they had to face legal issues. They also had to face up to all their angry customers
whom they had placed in a dangerous situation had their vehicles fuel system been clogged.
The customers were very disappointed due to the fact that Ford had lied to them and never even
bothered about the safety of their lives.

The third theory is the Kantian theory. By analyzing Ford’s decision from a Kant’s point of
view, it is obvious that Ford was very unethical. Kantianism states that our ethical duty is to
treat people with respect and treat them as an end and never as means only. Ford did the exact
opposite by disrespecting their customers by hiding the issue of their faulty gas tanks. It is
understandable that Ford only came to know of this issue in 2007 despite the production of
vehicles since 1999. However the mistake Ford made as soon as it found out about this issue
was not done in a proper manner. Ford kept this issue a secret from its stakeholders despite
sending out secret memo’s to its dealerships. That was not the only mistake Ford made. They
also refused to fix the problem without charge. Ford was clearly viewing their customers as
means of producing income and not as an end of customer satisfaction. Due to the lack of
respect shown to the customers by Ford, the Kantian theory dictates that their decision is
unethical.

The final theory used to analyze Ford in this situation is the virtue theory. This theory states
that in order for a decision to be virtuous it must meet all four virtues, which compromises of
courage, temperance, justice and honesty. In Ford’s situation, not even one of these theories
were met when they decided to ignore the situation regarding their faulty gas tank. In terms of
courage, Ford displayed none at all. They were unable to stand up for what was right no matter
what the risk was. They were willing to put the lives of their customers on the line in order to
prevent money from being lost. Ford also lacked temperance; their goal of keeping the faulty
tanks a secret was very unreasonable. Finally Ford also lacked justice and honesty. They
behaved in an unfair and dishonest manner by not revealing the truth to their customers and
also refusing to fix the problem even though it was putting the life of its customers in danger.
Based on the virtue theory, Ford was not virtuous and extremely unethical.

896 WORDS
 3) Adidas – Kangaroo’s Killed for Sport

Adidas is one of the most renowned sports apparel companies in the world. Founded in 1948
by Adolf Dassler, Adidas alongside Nike has dominated the world of sports by its
manufacturing of sports jersey, shoes and accessories. Till this very day Adidas continues to
grow rapidly in terms of customer base and financial power. One of the main reasons that has
contributed to Adidas success is its venture into the vast majority of sports. Among the main
sports that Adidas is involved in are running, soccer, American football, golf, tennis, baseball,
basketball, cricket, rugby, field hockey, lacrosse, gymnastics, skateboarding, and swimming.
One particular sport that Adidas has a big impact on is soccer or commonly known as football.
For years it had been producing club jersey as well as some of the best performance and
fashionable cleats. Back in 2007, Adidas decided to up their game by using a new material in
order to produce the best performance cleats possible. However they went too far in this
situation. They hired a company in Australia to hunt kangaroos and have them killed in order
to use its skin as a material for their new leather cleats. Adidas were successful in executing
their idea as those cleats were able to improve the performance of the players who were wearing
it. The kangaroo leather was lighter and it also adds support and gives an all-around better
feeling to its user. Needless to say this caused a major uproar among many animal activist.
Back then, the kangaroo population was increasing rapidly which caused worry to the
Australian government because the kangaroos were eating through the grassy habitat of
endangered species. In a way Adidas helped the government solve its problem. However, the
main reason Adidas was criticized was because the company hired by Adidas to collect the
kangaroo skins used incredibly inhumane way to kill the kangaroos, such as hitting them with
cars and beating them with tools. When this issue came to light, an organization known as
VIVA (Vegetarians International Voice for Animals) filed a lawsuit against Adidas. They also
alerted the public in order to prevent the purchasing of cleats. Based on most ethical theory
perspectives such as the Utilitarian theory, the Kantian theory and the virtue theory, Adidas
actions would be considered unethical.
However, if the situation if viewed based on the individualist’ perspective, Adidas has the right
to do whatever they can in order to maximize profit given they follow the law. Adidas cannot
be found guilty because they have not broken any law and they have the right to sell their cleats.
Football players and managers would prefer the usage of a cleat that can boost the player’s
performance on the pitch. So continuing to produce and sell this cleats would not violate the
law based on the individualist theory.
Under the utilitarianism theory, Adidas actions would be considered unethical. The utilitarian
theory is defined by trying to create happiness for everyone. However, in this situation most
parties involved clearly display unhappiness. With the aid and support of VIVA, organizations
have been formed to boycott the selling of these cleats. Adidas alongside its stakeholders are
happy because they have been able to increase their profits, but not all parties are happy with
the situation which contradicts the utilitarianism theory. Also, looking at it from the kangaroos’
perspective, I’m sure they aren’t too happy about the cleats either.
The second theory that would consider Adidas to be unethical is the Kantian theory. This theory
is made up of four key elements which are to always act consistently and rationally, help out
in making rational decisions, respect everyone and be motivated by good will. Adidas does not
display even one of this attribute in this situation. The Kantian theory would disagree with
Adidas’ actions because they have not respect all parties. VIVA and the other organizations are
angry with Adidas due to their inhumane ways of acquiring the skin from the kangaroo.
However, Adidas paid no attention to their plea.
The third and final theory is the virtue theory. There are four virtues that build this theory which
is courage, honesty, temperance and justice. Using the courage virtue, Adidas should take a
stand for the right idea and action. They know there are other ways to obtain the kangaroo skin
which are less brutal then their current method. The second virtue is honesty. Despite the
lawsuit and protest, Adidas still continues to employ the same company to do its dirty work.
Most of the public are aware of it. Adidas has not lied to the organizations trying to prevent the
production of these cleats, but they have continued to close an eye and ignore their plea. The
third virtue is temperance. When the public heard that Adidas was using kangaroo skin to
produce the cleats, most of the expected it to come from kangaroo that had died, not from
killing them in such a brutal manner. The final virtue is justice. Despite protest for
organizations such as VIVA, Adidas still continues to ignore them. Currently, Adidas may be
able to make profit from these cleats, but in the long run their reputation will be tarnished.

863 WORDS
 Reference

1) PRNewswire. (2006) Starbuck Accused of Abusing Monopoly Power in Violation of

Sherman Act. [Online] Available at : http://www.prnewswire.com/news-
releases/starbucks-accused-of-abusing-monopoly-power-in-violation-of-sherman-act-
57142892.html [Assessed : 4th February 2016]
2) TorqueNews. (2012) Ford Being Sued for Using Faulty F-Series Fuel Tanks. [Online]
Available at : http://www.torquenews.com/106/ford-being-sued-using-faulty-f-series-
fuel-tanks [Assessed : 4th February 2016]
3) Viva!. (2011) Kangaroos Killed For Sport. [Online] Available at :
http://www.savethekangaroo.com/adidas [Assessed : 4th February 2016]
4) Wikipedia. (2016) Utilitarianism. [Online] Available at :
https://en.wikipedia.org/wiki/Utilitarianism [Assessed : 4th February 2016]
5) Kantian Ethics. (2016) Kantian Ethics. [Online] Available at :
http://www.csus.edu/indiv/g/gaskilld/ethics/Kantian%20Ethics.htm [Assessed : 4th
February 2016]
6) Stanford Encyclopedia of Philosophy. (2014) Virtue Ethics. [Online] Available at :
http://plato.stanford.edu/entries/ethics-virtue/ [Assessed : 4th February 2016]