Ethical and Legal Issues

in Selling
 Ethics and Personal Selling

Ethics are the principle governing

the behavior of an individual or a
group. These principles establish
appropriate behavior, indicating
what is right and wrong.
Examples of difficult situations that
salespeople face.

Should you give an expensive Christmas

gift to your biggest customer?
If a buyer tells you it is common practice
to pay off purchasing agents to get orders
in his or her country, should you do it?
Is it acceptable to use high-pressure sales
approach when you your product is the
best for the customer needs?
Ethics and Personal Relationship
Ethical principles are particularly
important in personal selling. Most
businesses try to develop long-term,
mutually beneficial relationships with
their customers.
Salespeople are the official
representatives of their companies,
responsible for developing and
maintaining these relationships.
Cont..
Legal principles guide market exchange
relationships. The issues governing buying
and selling in these relationships are
typically straightforward. The terms and
conditions are well defined and can easily
be written into traditional contract.
Cont..
Strategic partnerships. The parties in
these relationships cannot accurately
asses the potential benefits.
Manipulation- eliminates or reduces
the buyers choice unfairly.
Persuasion-one is trying to influence
the buyers decision, not force it.
Factor Affecting Ethical Behavior
of Salespeople
Social norms

Personal goals

Customer goals
Ethical behavior
Company goals

Personal code of
Company policies ethics

Values of significant
laws
to others
 Personal Company & Customer
Needs
CONFLICTING OBJECTIVES
Company Salesperson Customer
Objectives Objectives Objectives
Increase profits Increase Increase profits
compensation
Increase sales Receive recognition Solve problems,
satisfy needs.
Reduce sales cost Satisfy customers Reduce costs

Build long term Build long term Build relationships

Customer Customer with suppliers
relationships relationships

Avoid legal Maintain personal Avoid legal trouble

trouble code of ethics
Low baling is one unethical tactic that
occurs in large sales.
Research shows that a positive ethical
climate is related to job satisfaction,
commitment to the organization, and
intention to stay among salespeople.
Company policies

To maintain good relationships with

their companies and customers,
salespeople need to have a clear
sense of right and wrong so that
their companies and customers can
depend on them when questionable
situations arise.
 Ethics policy for Motorola
salespeople
Improper 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 and accurately recorded on the
books and records of Motorola.
 Customer supplier/government relationships

Motorola will respect the confidence of its

customers, Motorola will respect 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
us laws 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 that might affect employees
independence of judgment in transaction bet.
Motorola and other business enterprise
 Values of significant others
Some important people influencing the ethical
behavior of salespeople are their relatives and
friends, other salespeople and their sales
managers.
Sales manager are particularly important because
they establish the ethical climate in their
organization through the salespeople they hire, the
ethical training they provide for their salespeople,
and the degree to which they enforce ethical
standards.
 One study in the financial services industry
showed that salesperson ethical behavior leads to
higher customer satisfaction, trust and loyalty,
which mean greater repeat purchases.

Another study for manufacturing firms.

"unethical reps are run out of our industry."
good ethics are good business! Sales
managers and salespeople know that.
Laws

Laws dictates which activities society has

deemed to be clearly wrong, the activities for
which the salespeople and their companies will
be punished.
 Personal code of ethics
Salespeople should abide by their own
codes of ethics, they are tempted to avoid
difficult ethical choices by developing
"logical reasons for unethical conduct.
3 choices when a manager asks to
engage in activity you consider unethical.
1) Ignore your personal values and do what
your company asks you to do.
2) Take a stand and tell your employer what
you think.
3) Refuse to compromise your principles.
SELLING ETHICS AND RELATIONSHIP
The core principle at work in
considering ethics in professional selling
is the principle of fairness. The buyer
has the right to make the purchase
decision with equal and fair access to
the information needed to make the
decisions. Further, all competitors
should a fair access to the sales
opportunity.
 RELATIONSHIPS WITH CUSTOMERS
Areas of ethical concern involving
customers include using deception;
offering gifts, bribes and
entertainment; divulging confidential
information and rights to privacy and
backdoor selling.
Deception
Deliberately presenting inaccurate information,
or lying, to a customer is illegal. However
misleading customers by telling half-truths or
withholding important information is a matter of
ethics.
Bribes, gifts and entertainment
Bribes are payments made to buyers to
influence their purchase decisions.
Kickbacks are payments made to buyers based
on the amount of orders placed.
 Buyers typically are sensitive about receiving
expensive gifts, according to Shirley hunter,
account manager for Teradata. Some guidelines
for gift giving are as follows:
Check you motives for giving the gift.
Make sure the customer views the gift as a
symbol of appreciation and respect with no
strings attached.
Make sure the gifts does not violate the
customers or your firms policies.
The safest gifts are inexpensive business items
imprinted with the salesperson company name or
logo
 Special treatment
Some customers try to take advantage of their
status to get special treatment from salespeople.

Confidential information
During sales calls salespeople often encounter
confidential company information such as new
products under development, costs and
production schedules. Offering information about
customers competitor in exchange for an order in
unethical.

Backdoor selling
Salespeople engage in backdoor selling when
they ignore the purchasing agents policy, go
around his or her back, and contact other people
directly involved in the purchasing decision.
RELATIONSHIP WITH SALESPERSON
COMPANY
Buyers view of an unethical sales behaviors
1. Exaggerate benefits of product.
2. Passes the blame for something he or she did
to someone else.
3. Lies about product availability.
4. Misrepresents guarantee.
5. Lies about competition
6. Sells product that people do not need
7. Makes oral promises that are not legally biding
8. Is not interested in customer need.
9. Answers questions even when he or she does
not know the correct answer.
10. Sells hazardous products
 RELATIONSHIP WITH SALESPERSONS
COMPANY
EXPENSE ACCOUNTS
A salesperson who cannot live within the
company compensation plan and expense
policies has two ethical alternatives:
1) Persuade the company to change its
compensation plan or expense policy.
2) Find another job.
 REPORTING WORK TIME INFORMATION
AND ACTIVITIES
Employers expect their salespeople to work full
time.
To monitor work activities, many companies ask
their salespeople to provide daily call reports.

SWITCHING JOBS
When salespeople decide to change jobs, they
have an ethical responsibility to their
employers.
 The ethical approach to leaving a job
includes the following:
Give ample notice.
Offer assistance during the transition
phase.
Dont burn your bridges.
Dont take anything with you that belongs
to the company.
 RELATIONSHIP WITH COLLEAGUES
SEXUAL HARASSMENT
Sexual harassment includes unwelcome
sexual, requires for sexual favors, jokes,
or graffiti, and physical conduct. Some
actions that are considered sexual
harassment are:
1. Engaging in suggestive behavior
2. Treating people differently because they
are male or female
3. Making lewd sexual comments or
gestures
4. Joking that has sexual content
5. Showing obscene photographs.
6. Alleging that an employee got rewards
by engaging sexual acts
7. Spreading rumors about a persons
sexual conduct.
Following are some suggestions for dealing
with sexual harassment from customer:
Dont become so dependent on one customer
that you consider compromising your
principles to retain the customers business.
Tell the harasser in person or write a letter.
Utilize the sexual harassment policies of your
firm and customers firm to resolve problems.
 RELATIONSHIP WITH
COMPETITORS
Making false claims about competitors
products or sabotaging their efforts is
clearly unethical and often illegal.
Another questionable tactic is criticizing a
competitors products or policies.
 LEGAL ISSUES
The activities of salespeople in the united states
are affected by three forms:

Statutory law is based on legislation passed by

either state legislatures or congress. The main
statutory laws governing salespeople are the
uniform commercial code and anti trust laws.

Administrative laws are established by local state

or federal regulatory agencies. The federal trade
commission is the most active agency in
developing administrative laws affecting
salespeople.
However the securities and exchange
commission regulates stockbrokers, and
the food and drug administrative
regulates pharmaceutical salespeople.
Common law grows out of court decisions.
Precedents set by these decisions fill in
the gaps where no laws exist.
 UNIFORM COMMERCIAL CODE
UNIFORM COMMERCIAL CODE (UCC) is the legal
guide to commercial practice in the united states.
The UCC defines a number of terms related to
salespeople.

AGENCY
A person who acts in place of his or her company
is an agent. Authorized agents of a company
have the authority to legally obligate their firm in
a business transaction.
SALE
The UCC defines a sale as the transfer
of title to goods by the seller to the buyer
for a consideration known as price. a sale
differs from a contract to sell. Any time
a salesperson makes an offer and receives
an unqualified acceptance, a contract
exists. A sale is made when the contract is
completed and title passes from the buyer.
 TITLE AND RISK OF LOSS
If the terms of the c contract specify free on
board (FOB) destination, the seller has the title
until the goods arte received at the destination.
The UCC also defines when titles transfer for
goods shipped cash on delivery (COD) and for
goods sold on consignment.

ORAL VERSUS WRITTEN AGREEMETS

In most cases oral agreements between a
salesperson and a customer are just as binding
as written agreements.
 Obligations and performance
When the salesperson and the customer agree
on the terms of a contract, both firms must
perform according to the firms of good faith.
Warranties
A warranty is an assurance by the seller that
the products will perform as presented
sometimes a warranty is called a guarantee.
The UCC distinguishes bet. two types of
warranties, expressed and implied. An
expressed warranty is an oral or a written
statement by the seller. An implied warranty
is not actually sated but it is still an obligation
defined by law.
 MISREPRESENTATION OR SALES
PUFFERY

Glowing descriptions such as service cant

be beat are considered to be opinions or
sales puffery. Customers cannot rely on
these statements.
Credulous person standard. This standard
means the company and the salesperson
have to pay damages if a reasonable person
could be misunderstand the statement.
 ILLEGAL BUSINESS PRACTICES
The Sherman Antitrust act of 1890, the
Clayton act of 1914, the federal trade
commission act of 1914, and the Robinson-
Patman act of 1934 prohibit unfair business
practices to lessen competition.
Business defamation occurs when a
salesperson makes unfair or untrue
statements to customers about a competitor,
its products, or its salespeople.
Reciprocity
Is a special relationship in which two
companies agree to buy products from
each other.
Reciprocity is illegal if one company
forces another company to join the
agreement. Reciprocity is legal only
when both parties consent to the
agreement willingly.
 Tying agreements
A buyer is required to purchase one product in
order to get another product.
Conspiracy and collusion
An agreement between competitors before
customers are contacted is a conspiracy
whereas collusion refers to competitors
working together while the customer is making
a purchase decision.
Restrictions on resellers
It was illegal for companies to establish a
minimum price below which their distributors
or retailers could not resell their products, this
practice is called resale price maintenance
 Spiff stands for special promotion incentive a
fund, and dates back a time when there was
more selling by retail salespeople.
Price Discrimination
Court decisions related to Robinson patman
act define price discrimination as a seller giving
unsatisfied special prices , discounts or services
to some customers and not to others.
Privacy laws
Limit the amount of information that a firm can
obtain about consumer specify how that
information can be used or shared.
 International ethical and legal
issues
Lubrication involves small sums or gifts,
typically made to low ranking managers or
government or officials, in countries where
these payments are not illegal. The
lubrication payments are made to get the
official or manager to do the job more
rapidly.
Subordination involves paying larger sums of
money to higher ranking officials to get them
do something that is illegal or to ignore an
illegal.
RESOLVING CULTURAL DIFFERENCES

CULTURAL RELATIVISM is the view that no

cultures ethics are superior.

EHICAL IMPRIALISM is the view that ethical

standards in ones home country should be
applied to ones behavior across the world.