1. Ethical & Legal Issues in Selling
Chapter 2

2. Ethics Definition
*Principles governing the behavior of an individual or a group. These principles establish appropriate behavior indicating what is right and wrong.

3. The Evolution of Personal Selling Exhibit 2.1 – Page 31

4. Ethics & Partnering Relationships
*Built on trust
*Studies show trust deteriorates rapidly
*See example questions – Page 36
*We will be doing 6 ethical exercises involving the professional selling profession

5. Factors influencing ethical behavior
Note: Exhibit 2.2. and 2.3 in text (Page 34)
Factors affecting Ethical Behavior of salespeople:
Salesperson (Personal) Objectives Company objectives
Customer Objectives

6. Factors influencing ethical behavior
*positive ethical climate highly correlated to job satisfaction, commitment, & low turnover among employees
Values of significant others play a critical role in shaping values. Be careful who you associate with!!
Some studies show politicians, preachers, and professors are more unethical than salespeople!!

7. A Personal Code of Ethics
Develop an individual standard of conduct – Line in the sand!
If you disagree with the firm’s stance on ethical issues you can: 1) Ignore personal values and do what the company asks
2) Take a stand and tell your employer what you think
3) Refuse to compromise your principles

8. Checklist For Making Ethical Decisions P. 36 – Exhibit 2.4

9. Relationships with Customers
Deception
Deliberately presenting inaccurate information
“White lies”
Bribes, Gifts, and Entertainment
Bribes- payments made to buyers to influence their purchase decision
Kickbacks- payments made to buyers based on the amounts of orders placed
Special Treatment
Taking advantage of their status

10. Continued Confidential Information
Disclosing confidential information can be hazardous to the level of customer trust with the salesperson
Back-Door Selling
Occurs when salespeople ignore the purchasing agent’s policy, go around his or her back, and contact other people directly involved in the purchasing decision

11. Relationship’s with the Salesperson’s Company
Expense Accounts
Incurred expenses are necessary
Should not take advantage of the account for personal gains
Reporting Work-Time Information and Activities
Employees are expected to work
Solution: Daily call reports
Switching Jobs
Give ample notice
Offer assistance during the transition phase
Don’t burn your bridges
Don’t take anything that doesn’t belong to you

12. Relationships with Company/Colleagues/Competitors
Sexual Harassment
Includes unwelcome sexual advances, requests for sexual favors, jokes or graffiti, and physical conduct
Quid Pro Quo
Hostile environment
Taking Advantage of Other Salespeople
Unethical when salespeople are too aggressive in pursuing their own goals at the expense of their colleagues

13. Legal Issues
Statutory law- based on legislation passed either by state legislatures or by Congress
Administrative laws- established by local, state, or federal regulatory agencies
Common law- grows out of court decisions

14. Uniform Commercial Code & Sale
Legal guide to commercial practice in the United States
Note following terms:
Agent- a person who acts in place of his or her company -has the authority to legally obligate their firm in a business transaction
Sale - the transfer of title to goods by the seller to the buyer for a consideration known as price
Contract to sell- anytime a salesperson makes an offer and receives an unqualified acceptance

15. Title & Risk of Loss Invitation To Negotiate- sales presentation
Offer- salesperson quotes specific terms
Orders- written offers that become contracts when they are signed by an authorized representative in the salesperson’s company
Title and Risk of Loss
FOB (free on board) destination- seller has title until the goods are received at the destination -any loss or damage incurred during transportation is seller’s responsibility
FOB factory-the buyer assumes this responsibility & risk

16. Relationships (Continued)
Oral Vs. Written Agreements
oral agreements just as binding as written agreements
written agreements are required for sales over $500
Obligations and Performance
once there is an agreement of terms both firms must perform according to those terms in “good faith”
Warranties
an assurance by the seller that the products will perform as presented
Express warranty- oral or written statement by the seller
Implied warranty- not actually stated but is still an obligation defined by law

17. Misrepresentation or Sales Puffery
Sales puffery involves opinions with glowing descriptions
(Ex.- “Our service can’t be beat”)
Misrepresentation involves misrepresentation of facts and warranties
(Ex.-”Our system will reduce your inventory by 40%”)

18. False Claims Act Also known as the Lincoln Law, passed in 1863
Purpose – To prevent fraudulent claims by contractors and protect citizens against false claims. A person bringing a fraud claim may share in damages if contractor is found guilty!

19. Misrepresentation Credulous Person Standard – P.48
a company and the salesperson have to pay damages if a reasonable person could misunderstand the statement

20. Illegal Business Practices
Sherman Antitrust Act – 1890
Clayton Act – 1914
Federal Trade Commission Act – 1914
Robinson-Patman Act – 1934
ALL prohibit unfair business practices
that may reduce competition

21. Illegal Business Practice
Business Defamation
occurs when a salesperson makes unfair or untrue statements to customers about a competitor, its products, or its salespeople
Reciprocity
a special relationship in which two companies agree to buy products from each other – illegal if forced
Tying Agreements
a buyer is required to purchase one product in order to get another product – typically illegal, not always

22. Illegal Business Practices
Conspiracy and Collusion
Conspiracy- an agreement between competitors before customers are contacted
Collusion- competitors working together while the customer is making a purchase decision
Interference with Competitors
Illegal interference may occur when:
1) Trying to get a customer to break a contract with a competitor
2) Tampering with a competitor’s product
3) Confusing a competitor’s market research by buying merchandise from stores

23. Restrictions on Resellers
Resale Price Maintenance – legal for manufacturers, wholesalers, retailers and resellers to set minimum prices
Do not have to sell to everyone
Can offer Spiffs – incentives to push products – legal if everyone agrees

24. Privacy Laws & Do-Not-Call Law
Must notify consumers about use of their information
European laws are more strict
Do-Not-Call Law applies if you are NOT already a customer
Rules do not apply to business phones

25. CAN-SPAM Act
Intended to reduce deceptive s & usually contains opt-out process
Fines up to $40,000 for each sent
Individuals have gone to jail for violating this law
Companies can send promotional messages, but the messages must NOT be deceptive

26. International Ethical & Legal Issues
Lubrication – involves small gifts & money to help make the sale
Subordination – involves larger sums of money to high ranking officials illegal or ignore an illegal act. Even in countries where bribery is common, it is still considered unethical

27. Resolving Cultural Differences
Cultural Relativism – view that no culture’s ethics are superior
Ethical Imperialism – view that your country’s standards should be applied worldwide. See P. 52 for examples
Foreign Corrupt Practices Act – illegal for U.S. companies to pay bribes to foreigners

28. Selling Yourself!! Four key points – learn all in this class!
*Attitude
*Appearance
*Oral communication skills
*Written communication skills

29. Example In Class Designed To Make You…
THINK

30. Article: “How To Make The Sale And Remain Ethical”
Why we have unethical behavior:
Lack of teaching
Learn from media (not good)
Influence of immediate supervisor
Pressure to reach objectives
Why is ethical behavior difficult to practice:
Adherence to strict chain of command
Must be communicated and reinforced

31. Questions?