Retail

Management
Chapter 2
Retail Legal and
Ethical Behavior

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

 Outline
• Explain how legislation constrains a retailer’s
pricing policies
• Differentiate between legal and illegal
promotional activities
• Explain the retailer’s responsibilities
regarding the products sold

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Outline
• Discuss the impact of governmental
regulation on a retailer’s behavior with other
supply chain members
• Describe how various state and local laws,
in addition to federal regulations, must also
be considered in developing retail policies
• Explain how a retailer’s code of ethics will
influence its behavior

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Ethical and Legal Constraints
Influencing
Retailers Major Federal Laws
Pricing Constraints
Promotional Constraints
Product Constraints
Ethical Behavior Supply Chain Constraints Other Federal Laws
Buying Merchandise Mergers/Acquisitions
Selling Merchandise Retail Trade Agreements
Retailer-Employee Decision Human Resources
Relationship Maker Tax
SEC Regulations
State and Local Laws Americans with Disabilities
Zoning
Unfair Trade Practices
Building Codes
Blue Laws
Franchise Laws
Green River Ordinances
State Licenses

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Indonesia Laws that Affect Retailing

Undang-Undang No. 7 Tahun 2014 tentang

Perdagangan UU_NO_7_2014

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Indonesia Laws that Affect Retailing

Peraturan Presiden Nomor 112 Tahun 2007

tentang Penataan dan Pembinaan Pasar
Tradisional, Pusat Perbelanjaan dan Toko
Modern PERATURAN PRESIDEN 112 tahun 2007

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Indonesia Laws that Affect Retailing

Peraturan Presiden Nomor 39 Tahun 2014 tentang

Daftar Bidang Usaha yang Tertutup dan Bidang
Usaha yang Terbuka dengan Persyaratan di
Bidang Usaha Penanaman Modal PP 39_2014 Full

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Indonesia Laws that Affect Retailing

Peraturan Menteri Perdagangan Nomor 68/M-

DAG/PER/10/2012 tentang Waralaba untuk Jenis Usaha
Toko Modern Waralaba – Permendag 68 Tahun 2012
tentang Waralaba Untuk Jenis Usaha Toko Modern

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Indonesia Laws that Affect Retailing
Peraturan Menteri Perdagangan Nomor 70/M-
DAG/PER/12/2013 tentang Pedoman Penataan dan
Pembinaan Pasar Tradisional, Pusat Perbelanjaan dan
Toko Modern, dan perubahannya dalam Permendag No.
56/M-DAG/PER/9/2014. permendag 70-2013 permendag
nomor 56 tahun 2014

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Indonesia Laws that Affect Retailing

Berdasarkan Pasal 1 butir 5 Perpres 112/2007 jo Pasal 1

butir 5 Permendag 53/2008 yang dimaksud dengan ritel
modern atau toko modern yaitu toko dengan sistem
pelayanan mandiri, menjual berbagai jenis barang secara
eceran yang berbentuk Minimarket, Supermarket,
Department Store, Hypermarket, ataupun grosir berbentuk
Perkulakan.

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Pricing Constraints
Horizontal Price-
Fixing Laws
Vertical Price-
Below-cost
Fixing Laws
Pricing Laws

Pricing
Decisions

Price
Predatory Pricing
Discrimination
Laws
Laws
Deceptive Pricing
Laws

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Pricing Constraints

 Horizontal Price Fixing

Occurs when a group of competing retailers
(or other channel members operating at a
given level of distribution) establishes a fixed
price at which to sell certain brands of
products

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Pricing Constraints

 Vertical Price Fixing

Occurs when a retailer collaborates with the
manufacturer or wholesaler to resell an item
at an agreed-on price

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Pricing Constraints

 Price Discrimination
Occurs when two retailers buy an identical
amount of “like grade and quality”
merchandise from the same supplier but pay
different prices

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Pricing Constraints
 Deceptive Pricing
Occurs when a misleading price is used to
lure customers into the store; usually there
are hidden charges or the item advertised
may be unavailable

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Pricing Constraints

 Predatory Pricing
Exists when a retail chain charges different
prices in different geographic areas to
eliminate competition in selected geographic
areas

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Promotion Constraints

 Palming Off
Occurs when a retailer represents that
merchandise is made by a firm other than
the true manufacturer

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Promotion Constraints

Deceptive Sales Deceitful

Practices Diversion of
Patronage

Promotion
Decisions

Deceptive
Advertising

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Product Constraints

Product Product
Warranties Safety

Product
Decisions

Product
Liability

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Product Constraints
 Product Liability Laws
Deal with the seller’s responsibility to market
safe products. These laws invoke the
“foreseability” doctrine, which states that a
seller of a product must attempt to foresee
how a product may be misused and warn the
consumer against hazards of misuse

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Product Constraints
 Expressed Warranties
Are either written or verbalized agreements
about the performance of a product and can
cover all attributes of the merchandise or
only one attribute

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Product Constraints
 Implied Warranty of Merchantability
Is made by every retailer when the retailer
sells goods and implies that the
merchandise sold is fit for the ordinary
purpose for which the such goods are
typically used

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Product Constraints
 Implied Warranty of Fitness
Is a warranty that implies that the
merchandise is fit for a particular purpose
and arises when the customer relies on the
retailer to assist or make the selection of
goods to serve a particular purpose

Berman,
23 B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Channel Constraints

Territorial
Restrictions

Tying Supply Chain Dual Distribution

Agreements Decisions

Exclusive Dealing

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Supply Chain Constraints
• Territorial Restrictions
Are attempts by the supplier, usually a
manufacturer, to limit the geographic area in
which a retailer may resell merchandise

Berman,
25 B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Supply Chain Constraints
• Dual Distribution
Occurs when a manufacturer sells to
independent retailers and also through its
own retail outlets

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Dual Distribution

 Ralph Lauren has a

dual distribution
strategy where it
markets its Polo
brand apparel
through its own retail
stores as well as
through traditional
department stores
Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
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 Exclusive Dealing
 One-Way Exclusive Dealing
Occurs when the supplier agrees to give the retailer
the exclusive right to merchandise the supplier’s
product in a particular trade area

• Two-Way Exclusive Dealing

Occurs when the supplier offers the retailer the
exclusive distribution of a merchandise line or
product in a particular trade if in return the retailer
will agree to do something for the manufacturer
such as heavily promote the supplier’s products or
not handle competing brands

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Tying Agreements
 Tying Agreement
Exists when a seller with a strong product or
service requires a buyer ( the retailer) to
purchase a weak product or service as a
condition for buying a strong product or
service

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethics in Retailing

 Ethical Behavior in Buying Merchandise

 Ethical Behavior in Selling Merchandise
 Ethical Behavior in Retailer-Employee
Relationship

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethics in Retailing
 Ethics
Is a set of rules for human moral behavior
• Explicit Code of Ethics
Consists of a written policy that states what is
ethical an unethical behavior
• Implicit Code of Ethics
Is an unwritten but well understood set of
rules or standards of moral responsibility

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethical Behavior in Buying
Merchandise
 Product Quality
 Sourcing
 Slotting Fees
 Bribery

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethical Behavior in Buying Merchandise

 Slotting Fees (Slotting Allowances)

Are fees paid by a vendor for space or a slot
on a retailer’s shelves, as well as having its
UPC number given a slot in the retailer’s
computer system

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethical Behavior in Selling Merchandise

 Products Sold
 Selling Practices

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethical Behavior in Selling
Merchandise

• Home Depot’s no
commission sales
approach does not put
the sales person at
odds with the
customer. However,
given Home Depot’s
self-service operation,
paying a commission
would be difficult

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Ethical Behavior in the Retailer-
Employee
Relationship
• Misuse of Company Assets
• Job Switching
• Employee Theft

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 National Retail Federation Principles
on Customer Data Privacy
• General Rule:
• The privacy of information collected by a retailer
about its customers during the course of transactions
with those customers should be maintained with the
degree of confidentiality that the retailer reasonably
anticipates would be expected of it by the typical
shopper purchasing that type of merchandise form
the retailer. Departures from this standard should be
disclosed to customers at or before each time of
occurrence, unless previously consented to by the
customer or otherwise expressly permitted by law

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 National Retail Federation Principles on
Customer Data Privacy

• Practice Principles:
• Each retailer should adopt a customer private policy
explaining its practices with respect to the information
it collects about its customers
• Policies could either be corporate-wide or divisional
depending upon the manner in which the company
believes customers view its retail operations
• A retailer should make reasonable efforts to inform its
customers of the existence of its customer private
policies, and make the substance of such policies
available on a regular basis
Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
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 National Retail Federation Principles
on Customer Data Privacy
• Practice Principles:
• At a minimum, a customer private policy should allow a
customer to elect whether he or she wishes to prevent the
marketing of his or her name to other unaffiliated corporations,
or to “opt out” of future promotional solicitations from the
company(s) to which the policy applies, or both

• Retail companies should develop procedures to reasonably

ensure that customer information is not accessible to, or used by
its employees or others in contravention of its policies and
customer elections, and that access to personally identifiable data
for non-promotional purposes is limited to those individuals with
a customer servicing need to know

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Price Discrimination

Meeting Competition in
Good Faith Defense

Justifications
Changing for Price
Market Discrimination
Conditions Cost
Defense Justification
Defense

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.

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 Promotional Constraints

Deceptive
Sales
Practices

Deceitful Promotion
Diversion Decisions
of Deceptive
Patronage Advertising

Berman,
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B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Product Constraints

Product
Safety

Product
Decisions
Product Product
Warranties Liability

Berman,
42 B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.
 Thank You

Berman, B. and Evans, J.R. (2010),”Retail Management : A Strategic Approach”, Pearson.