Ethical and legal issues in

selling
Reported by:

Rizza Estoconing
Analyn Jaos
Mark Angelo Dela Cruz
Wilma Bernardo
 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.
 continuation
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.
Continua……..
 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.
Continuation
 Strategic partnerships. The
parties in these relationships cannot
accurately asses the potential
benefits.
 Manipulation- eliminates or reduces
the buyer’s choice unfairly.
 Persuasion-one is trying to influence
the buyer’s decision, not force it.
Factor Affecting Ethical Behavior of
Salespeople
Social norms

Personal goals

Customer goals

Company goals Ethical behavior

Company policies Personal code of

ethics

laws Values of significant

to others
 Personal Company, and 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 with
Customer Customer suppliers
relationships relationships

Avoid legal Maintain personal Avoid legal trouble

trouble code of ethics
CONTINUATION
 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.
 Continuation
 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.
 Ignore your personal values and do what
your company asks you to do.
 Take a stand and tell your employer what
you think.
 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.
 Continuation
 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
2. EXAGGERATE BENEFITS OF PRODUCT.
3. PASSES THE BALME FOR SOMETHING HE OR SHE
DID TO SOMEONE ELSE.
4. LIES ABOUT PRODUCT AVAILABILITY.
5. MISREPRESENTS GUARANTEE.
6. LIES ABOUT COMPETITION
7. SELLS PRODUDT THA PEOPLE DO NOT NEED
8. MAKES ORAL PROMISES THAT ARE NOT LEGALLY
BIDING
9. IS NOT INTERESTED IN CUSTOMER NEED.
10. ANSWERS QUESTIONS EVEN WHEN HE OR SHE
DOES NOT KNOW THE CORRECT ANSWER.
11. SELLS HAZARDOUS PRODUCTS
 RELATIONSHIP WITH
SALESPERSON’S COMPANY
 EXPENSE ACCOUNTS
• A salesperson who cannot live within the
company compensation plan and expense
policies has two ethical alternatives:
3) Persuade the company to change its
compensation plan or expense policy.
4) 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.
• Don’t burn your bridges.
• Don’t 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:
3. Engaging in suggestive behavior
4. Treating people differently because
they are male or female
 Continuation
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:
• Don’t 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
contaract is completed and title passes
from the buyer.
• The UCC also distinguishes between an
offer and invitation to negotiate. A sales
presentation is usually considered an
invitation to negotiate. An offer takes
place when the salesperson quotes
specific terms.
• Salespeople are agents when they have
the authority to make offers. However,
most salespeople are not agents beciase
they have the poer only to solicit written
offers from buyers. These written offers
called orders, become contracts when
they are signed by an authorized
representative salesperson company.
 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 betwenn
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 can’t 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.
 Continuation
 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.