This document discusses ethical and legal issues in selling. It begins by outlining important questions about developing codes of ethics, responsibilities to customers and firms, and whether ethics conflict with success. It then covers factors influencing ethical behavior, guidelines for ethical decisions, and choices when asked to act unethically. The document also addresses relationships with customers, competitors, colleagues and companies as well as various laws governing sales practices.

1. Ethical and Legal Issues in Selling
Chapter 3

2. Important Questions Answered
 Why do salespeople need to develop their own codes of
ethics?
 Which ethical responsibilities do salespeople have
toward themselves, their firms, and their customers?
 Do ethics get in the way of being a successful
salesperson?
 Which guidelines should salespeople consider when
confronting situations involving an ethical issue?
 Which laws apply to personal selling?
2

3. “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

4. Ethics and Personal Selling
 Ethics are the principles governing the behaviour of an
individual or a group.
 These principles establish appropriate behaviour
indicating what is right and wrong.
 Difficult to determine what the principles are?
 Ethics/Ethical values vary from person to person, culture
to culture, country to country and from industry to
industry.
4

5. Ethics and Partnering Relationships
 Ethical principles are particularly important in personal
selling.
 Partnerships between buyers and sellers cannot develop
when salespeople behave unethically or illegally.
 These become increasingly important as firms move to
strategic partnerships.
Manipulation Persuasion is trying to
eliminates or reduces influence the buyer’s
the buyer’s choice VS decision, not force it.
unfairly.
5

6. Factors Influencing the Ethical
Behaviour of Salespeople
6

7. Factors Affecting Ethical Behavior of
Salespeople
 Factors influencing the ethical behavior of
salespeople
 Personal, company, and customer needs
 Company policies
 Values of significant others
 Laws
 A personal code of ethics
7.7

8. Personal, Company, and Customer
Needs
 Often salespeople get into situations where there is
a conflict between their and the customers’
interest. The best way out is to rely on their ethical
standards and understanding of the laws governing
these situations
8

9. Conflicting Objectives
9

10. Company Policies
 Company policies help salespeople and customer
understand the does and don'ts and avoid
difficult/indecisive situations.
10

11. Values of Significant Others
 People acquire their values and attitudes about what is
right and wrong from the people they interact with and
observe. e.g. relatives and friends, other salespeople, and
their sales managers.
 Sales managers 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
11

12. Laws
 Laws dictate which activities society has deemed
to be clearly wrong, the activities for which
salespeople and their companies will be punished
12

13. A Personal Code of Ethics
 Each salesperson has a sense of right and wrong -
a standard of conduct - from family and friends.
Although salespeople should abide by their own
codes of ethics, they may be tempted to avoid
difficult ethical choices by developing “logical’’
reasons for unethical conduct.
13

14. An Organization’s Main
Responsibilities
14

15. Guidelines for Ethical Behavior
 Universal Nature  Truth Telling
 Trust facilitates
 cooperation
 The golden rule  Responsibility for One's
Actions
 Everyone plays by the
 Don't blame others for
your problems
same rules
 The "victim" mentality
15

16. Checklist for Ethical Decisions
16

17. Choices You Can Make if Your
Manager Asks You to Act Unethically
 When a salesperson views polices or requests of the firm
as improper, he/she has three choices:
 Ignore personal values and do what company asks to do. Self-
respect suffers when one has to compromise principles to
please an employer. This will probably make the salesperson
feel guilty and dissatisfied with the job in the long run.
 Take a stand and tell the employer what he/she thinks. Try to
influence the decisions and policies of the company and
supervisors.
 Refuse to compromise his/her principles. Taking this path may
mean that the salesperson will get fired or be forced to quit.
 One should not take a job with a company whose
products, policies, and conduct conflict with your
standards. 17

18. Selling Ethics and Relationships
 The salespeople may confront some ethical
situations in their relationships with
 Customers
 Competitors
 Other colleagues (other salespeople)
18

19. Relationships with Customers
 Deception
 Bribes, Gifts and Entertainment
 Special Treatment
 Confidential Information
 Backdoor Selling
19

20. 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.
20

21. Bribes, Gifts and Entertainment
 Bribes : payments to buyers to influence decisions
 kickbacks : payments made to buyers based on the
amount of orders. Both of these have negative
consequences for the purchasing agent’s firm.
 On the other hand determining which gifts and
entertainment activities are acceptable and which are
not brings up ethical issues.
21

22. Special Treatment
 Some customers take advantage of their status to
get special treatment from salespeople, which may
upset other customers who do not get the special
attention. This special service can reduce the
salesperson’s productivity. Therefore, salespeople
should be diplomatic but careful about
undertaking requests to provide unusual services
22

23. Confidential Information
 Offering information about a customer’s
competitor in exchange for an order is unethical.
Long-term relationships can develop only when
customers trust salespeople to maintain
confidentiality. Disclosing confidential information
gives a bad reputation (untrustworthy) to the
salesperson.
23

24. Backdoor Selling
 Sales to ultimate consumers bypassing the
middlepersons or A salesperson's practice of
avoiding a purchasing agent. Some companies do
not allow, therefore, Backdoor selling can be very
risky and unethical.
24

25. Buyers’ View of Unethical Sales
Behaviour
25

26. The Tree of Business Life
 The Tree is rooted in
T
 Integrity: being honest and
without compromise or corruption
Se
al
T T
hic
r
From integrity flows confidence
vic

T T TT
Et
that one can trust the other
T T T T e  Integrity and trust form the
Builds attributes often referred to as
character
True
 Framed by
 Ethical Service that Builds True
Relationships Relationships
 Shown with T’s standing for
T I C  Truth: facts needed to make
ethical and moral decisions
26

27. Relationships with the Salesperson's
Company
Sales people in the field cannot be monitored. Companies
trust the salespersons and the professional salespersons do
not abuse this trust. Still there could be problems between
the salesperson and the company:
 Expense Accounts
 Reporting Work-time Information & Activities
 Switching Jobs
27

28. Expense Accounts
 Many companies provide their salespeople with
cars and reimburse them for travel and entertainment
expenses. It is good to have policies to be able to
treat all the salespersons equally.
To do their jobs well, salespeople need to incur
expenses. However, using their expense accounts to
offset what they consider to be inadequate
compensation is unethical.
28

29. Reporting Work-time
Information & Activities
 Salespersons are expected to work full time.
Some salaried salespersons steal time and waste
time on coffee breaks, long lunches, or
unauthorized days off. While some salespeople
paid by commission cheat by not working full
time. This result in decrease of their income and
profit of the company.
 To monitor work activities, many companies ask
their salespeople to provide daily call reports.
29

30. Switching Jobs
 As for every professional, when a salesperson
decides to change the job, has some ethical
responsibilities like:
 Give ample notice.
 Offer assistance during the transition phase.
 Don’t burn the bridges.
30

31. Relationships with Colleagues
To be effective, salespeople need to work together with
others. Unethical behaviour toward their co-workers, such
as engaging in sexual harassment and taking advantage of
colleagues, can weaken company morale and have a
negative effect on the company’s reputation.
reputation
31

32. Relationships with Competitors
Making false claims about competitors’ products or
sabotaging their efforts is unethical and often illegal. This
can even backfire can harm reputation of the salespeople
and their companies both. Another questionable tactic is
criticizing a competitor’s products or policies.
32

33. ETHICS
Responsibility
to
your conscience
Self
Responsibility Inaccuracies in Expense Accounts
to Honesty in Using Time and Resources
your
Company Accuracy in Filling Out Order Forms
Representing the Company
Responsibility
to  No false claims
Competitors
Responsibility
 Overselling and Misrepresenting
to Products or Services
Customers Keeping Confidences
Gifts & Entertainment
33

34. Legal Issues
Salespeople violating the activities determined by the
society as unethical and are often countered by a legal
system. This does not only causes problems to themselves
but to their companies as well.
34

35. 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
 Sale
 Title and Risk of Loss
 Oral versus written Agreements
 Obligations and Performance
 Warranties
35

36. Agency
 Salesperson who is a representative of the
company, therefore, his/her statements and
actions represent the company. These legally bind
the company and have significant financial impact.
7.36

37. Sale
 The transfer of title to goods by the seller to the
buyer for a consideration known as price.
7.37

38. Title and Risk of Loss
 Understanding the terms of the sale and who has
title can be useful in resolving complaints about
damaged merchandise.
7.38

39. Oral Versus Written Agreement
 In most cases oral and written agreements between
a salesperson & a customer are equally binding.
Normally, written agreements are required for big
transactions. One must be careful when signing
written agreements.
7.39

40. Obligations and Performance
 Once the agreement is concluded, both firms must
perform according to those terms in “good faith.’’
Even if salespeople overstate the performance of
their products, their firms have to provide the
stated performance and meet the terms of the
contract.
7.40

41. Warranties
 Is an assurance by the seller that the products will
perform as represented. Sometimes a warranty is called a
guarantee.
41

42. Misrepresentation or Sales Puffery
 Misrepresentation
 “Mechanically, this oil rig is a 9 on a scale of 10.”
 “Feel free to prescribe this drug to your patients, doctor. It’s
nonaddicting.”
 At times salespersons exaggerate performance of
products. Glowing descriptions are considered as
Opinions or Sales Puffery.
 “This is a top-notch product.”
 “This product will last a lifetime.”
 Factual statements become particularly strong indicators
of an expressed warranty when complex products are
sold to unsophisticated buyers
42

43. Illegal Business Practices
 Laws are defined and courts use these laws to Create
common law that defines illegal business practices
 Business Defamation
 Reciprocity
 Tying Agreements
 Conspiracy and Collusion
 Interference with Competitors
 Restrictions on Resellers
 Price Discrimination
43

44. Business Defamation
 It occurs when a salesperson makes unfair or
untrue statements to the customer about
competitor, its products, or its salespeople.
7.44

45. Reciprocity
 It is a special relationship in which two companies
agree to buy products from each other. These
agreements are illegal if one company forces the
other one to join the agreement.
7.45

46. Tying Agreements
 If a buyer is required to purchase a product in
order to get another one. Such agreements are legal
only if it could be proved that both the items
should be used together
7.46

47. Conspiracy and Collusion
 An agreement between competitors before
customers are contacted is a conspiracy; while
collusion refers to competitors working together
while the customer is making a purchase decision
7.47

48. Interference with Competitors
 Salespeople may illegally interfere with
competitors by
 Trying to get a customer to break a contract with a
competitor.
 Tampering with a competitor’s product.
 Confusing a competitor’s market research by buying
merchandise from stores.
7.48

49. Restrictions on Resellers
 Numerous laws govern the relationship between
manufacturers & resellers/wholesalers and
retailers. These laws change with time.
7.49

50. Price Discrimination
 A seller price discriminates when it charges
different prices to different buyers.
7.50

51. Legal Guidelines
 To reduce the chances of violating laws governing sales
practices, you should adopt the following guidelines
 Be sure that all specific statements about your product’s
performance, such as technical characteristics and useful life,
are accurate.
 Be sure that all specific positive statements about performance
can be supported by evidence. If you make strong positive
statements that cannot be supported, use very general wording,
such as high quality and great value.
 If your customers do not pay attention to warnings and
operating instructions, remind them to read this information.
Never suggest that this information can be ignored.
 If customers contemplate using your product incorrectly or in
an inappropriate application, caution them specifically about
how the product should be used.51

52. Legal Guidelines (Contd.)
 Assess your customer’s experience and knowledge. Your legal
obligations are greatest with unsophisticated customers.
 Don’t make negative statements about a competitor’s
product, financial condition, or business practices. Never
pass along rumours about competitors.
52

53. Ethical and Legal Issues in
International Selling
Ethical and legal issues are very complex when selling
in international markets. Value judgments and laws
vary widely across cultures and countries. Behaviour
that is commonly accepted as proper in one country
can be completely unacceptable in another country.
53

54. International Ethical and Legal Issues
Lubrication…small sums of money or gifts, typically made
to low-ranking managers or government officials in order to
get things to happen more quickly.
Subordination…large payments to higher-ranking officials
to get them to do something illegal or ignore an legal act.
Resolving cultural differences
 Cultural relativism…no culture’s ethics are superior
 Ethical imperialism…home country’s ethics should be applied
to one’s behavior across the world.
It is important that the salespersons are aware of the host
as well as their own country when working internationally.
7.54

55. LEGAL ISSUES FACING THE
SALESPERSON
 Quality below standard specified
 Violation of delivery date
 Pricing concessions
 Incomplete or incorrect instructions
Some  Price fixing
Legal
Traps  Delivering a different brand than that sold
 Misrepresentation of product usage
 Kickbacks to buyer
 Charges after the sale
 Misuse of proprietary data
 Signing agreements without the proper authorization
Categories  Antimonopoly
of
Laws  Deceptive actions
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 Preserve competition

56. How to keep out of Legal Trouble
"Puffery" vs. statements of fact.
Educate the customer thoroughly before making the sale
Know technical specs, etc. for the product you sell.
Know your company's literature. Challenge it if is false
Know the terms of sale policies. You can bind the
company
Know federal and state laws regarding your product and
its warranties
Don't guess at your product's capabilities
56

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

58. End of Chapter 3

59. Thank you