Republic of the Philippines

CAVITE STATE UNIVERSITY NAIC

(Formerly CAVITE COLLEGE OF FISHERIES)
Bucana Malaki, Naic, Cavite
www.cvsu-naic.edu.ph

Management Department
Bachelor of Science in Business Management III
MKTG 70 – PROFESSIONAL SALESMANSHIP

Module I:
SELLING AS A PROFESSION
Lesson 3: Ethical and Legal Issues in Selling

Prepared by:

RHONALYN C. PAPA
Instructor I

Reviewed by

EDRIANE E. SERRANO
Management Department Chair

Noted by:

MAT M. NUESTRO
Director for Curriculum and Instruction
 PREFACE

This module aims to provide students with management principles that emphasized on
sales, selling and techniques and policies including salesmanship, retailing, and wholesaling.

This will aid the students to develop and showcase their skills in selling, demonstrating, and
presenting products and services professionally.
 ABOUT THE AUTHOR

The Author, Rhonalyn C. Papa, is a full-time faculty member of the Management

Department of Cavite State University Naic. She finished Master in Business Administration
in Cavite State University Indang and earned six units in Doctor of Philosophy in Business
Administration in De La Salle University, Dasmariñas. She started her teaching career in
2009 wherein she teaches mostly marketing subjects.

She is currently residing at Calumpang Cerca, Indang. Cavite

 MODULE 1: SELLING AND SALESPEOPLE

Objectives:
After the completion of the unit, students will be able to:
1. discuss the ethical and legal issues in selling
2. explain what is ethics and personal selling
3. discuss the selling ethics and relationships
4. explain the legal issues
5. discuss the ethical and legal issues in Selling
Instructions to Learners:
1. The learner is advised to answer the pre-test to determine how much is already
known by the learner about the topic and the post-test to find out how far the learner
learned from the module.
2. The answered pre-test and the activities (Activity 5) should be submitted on October
29.
PRE-TEST: How much did you know?

Answer the following based on your learned knowledge.

1. How do you consider gift giving in selling?
_
 LESSON 3: ETHICAL AND LEGAL ISSUES IN SELLING

Ethics and Personal Selling

Ethics, in the context of personal selling, can be understood as the guiding principles
that govern the conduct of individuals or groups involved in sales activities. These principles
serve as a moral compass, delineating what is considered right and wrong in the realm of
sales and customer interactions. While defining the term is relatively straightforward,
determining the specific principles can be a complex endeavor, as ethical considerations can
vary from person to person.

As George Bernard Shaw succinctly put it, "Ethics is what you do when no one is
looking." This perspective underscores the importance of ethical behavior, even in situations
where there is no external scrutiny. Ethical decisions are integral to the integrity and
reputation of sales professionals.

Let's consider some challenging scenarios that salespeople may encounter:

1. Should you give an expensive gift to a buyer?

This situation raises ethical questions about the intentions behind gift-giving. While building
relationships with clients is essential, giving expensive gifts might be seen as an attempt to
unduly influence the buyer's decision. Salespeople should carefully consider the ethical
implications of such actions.

2. Is it acceptable to use a high-pressure sales approach when you know your product
is the best for the consumer's needs?

Balancing the desire to close a sale with the ethical responsibility to respect a consumer's
autonomy can be challenging. High-pressure tactics may lead to a sale, but they can also
harm the long-term relationship and reputation of the salesperson and the company.

3. Should you attempt to sell a product to a customer if you know a better product exists
for that application?

In this scenario, ethical considerations revolve around transparency and honesty. It's
important to prioritize the customer's best interests and offer them the product that truly suits
their needs, even if it means not making an immediate sale.

4. If you know about the poor performance features of a competing product, should you
tell the customer about them?

Honesty and integrity are vital in this situation. Disclosing shortcomings of a competing
product should be based on facts and not used as a means to discredit the competition
unfairly. It's about providing the customer with accurate information to make an informed
decision.

5. Should you put the cost of a hotel room on your expense account even though you
stayed at a friend's house during a business trip?
 This situation involves financial honesty. Ethical salespeople should accurately report
expenses, ensuring that their expense accounts reflect actual business-related expenditures.
Falsifying expenses can damage trust and reputation.

In conclusion, ethical considerations play a crucial role in personal selling. Sales

professionals must navigate complex situations while upholding principles of honesty,
transparency, and fairness to maintain their integrity and credibility in the industry.

Influences on Ethical Behavior

Ethical behavior is shaped by various factors, which can be broadly categorized into
individual and organizational influences. These influences play a pivotal role in determining
how individuals conduct themselves in personal and professional contexts.

Individual Influences

Personal Moral and Ethical Values: An individual's ethical behavior is significantly

influenced by their personal moral and ethical values. These internal principles and beliefs
guide their decisions and actions, serving as a foundation for ethical conduct.

Organizational Influences

Integrity of Top Management and Managers: The ethical climate within an

organization is greatly impacted by the integrity and ethical standards set by top
management and managers. Their leadership and example can shape the behavior of
employees at all levels.

Levels of Moral Development

Ethical behavior can be understood in the context of different levels of moral

development:

Level 1: Principled – At this level, individuals strive to determine what is the right thing to do.
Their decisions and actions are guided by a strong moral compass, with a focus on ethical
principles.

Level 2: Conventional – Individuals at this level tend to adhere to what they are legally
required to do. Legal and societal norms play a central role in their ethical decision-making.

Level 3: Pre-conventional – Those at this level may primarily consider what they can get
away with. Their decisions may be influenced by a desire to avoid punishment or gain
personal advantage.

However, it's important to remember that ethical behavior transcends these levels.
As Augustine of Hippo wisely stated, "Wrong is wrong even if everyone is doing it; Right is
right even if no one is doing it." Ethical conduct should not merely conform to societal or
legal norms but should reflect a deeper commitment to doing what is morally right.
What is Ethical Behavior?

Ethical behavior encompasses a set of principles and actions, including:

Being Honest and Truthful: This involves telling the truth, being transparent, and
not engaging in deceitful or misleading practices.

Maintaining Confidence and Trust: Ethical behavior includes keeping the trust and
confidence of others, particularly in professional relationships.

Following the Rules: Adhering to laws, regulations, and organizational policies is a

fundamental aspect of ethical behavior.

Conducting Yourself in the Proper Manner: This implies behaving in a manner

that is respectful, professional, and considerate of others.

Treating Others Fairly: Ethical behavior involves treating all individuals fairly and
without discrimination, irrespective of their background or characteristics.

Demonstrating Loyalty to Company and Associates: Being loyal to one's

organization and colleagues while also maintaining ethical standards is a balance that
ethical individuals strive to achieve.

Carrying Your Share of the Work and Responsibility with 100 Percent Effort:
Ethical behavior includes fulfilling one's obligations and responsibilities diligently and with
dedication.

In conclusion, ethical behavior is a multifaceted concept influenced by personal

values, organizational culture, and different levels of moral development. It is characterized
by honesty, trustworthiness, adherence to rules, fairness, loyalty, and a strong work ethic.

Selling Ethics and Relationships

• Relationship with customers

• Relationship with the Salesperson’s Company
• Relationship with colleagues
• Relationship with competitors

A. Building Relationships with Customers

Deception: Deliberately providing inaccurate information or lying to a customer is not

only unethical but also illegal. Trust is the foundation of successful sales relationships.

Bribes, Gifts, and Entertainment:

Bribes: Bribes involve making payments to buyers to influence their purchase

decisions. This erodes trust and may result in the denial of necessary information for an
effective sales presentation.

Kickbacks: Kickbacks are payments to buyers based on the volume of orders

placed. Both bribes and kickbacks can be illegal and raise ethical concerns.
 Gift Giving: To navigate the ethical aspects of gift giving, consider the following
guidelines:

Examine your motives for giving a gift. It should aim to foster a mutually beneficial,
long-term relationship, not to obligate or buy customer loyalty.

Ensure the customer views the gift as a symbol of appreciation and respect, without
any expectations of reciprocation.

Ensure that the gift aligns with the customer's and your firm's policies.

Safe gifts often include inexpensive business items featuring the salesperson's
company's name or logo.

Special Treatments: Some customers may attempt to exploit their status to receive
special treatment from salespeople. Sales professionals should maintain fairness and
consistency in their dealings with all customers.

Confidential Information: Offering a customer's competitor's information in

exchange for an order is unethical and compromises business integrity.

Backdoor Selling: Salespeople engage in backdoor selling when they bypass the
purchasing agent's policy, contacting other individuals directly involved in purchasing
decisions. This practice is inconsiderate and may damage relationships.

In conclusion, ethical conduct in sales is crucial for building and maintaining strong
customer relationships. Deceptive practices, bribes, kickbacks, unethical gift-giving, and
backdoor selling can harm the trust and credibility that are vital for successful sales
interactions. It is essential to maintain transparency, fairness, and integrity in all customer
dealings.

B. Relationships with the Salesperson's Company

In the realm of maintaining a positive relationship with your employing company,

several key ethical considerations come into play:

Expense Account:

Companies often provide their sales personnel with resources, including cars and
reimbursements for travel and entertainment expenses. When utilizing the company's
expense account, it is essential to approach it as if you were spending your own money. This
entails responsible and ethical expenditure, keeping in mind the company's financial well-
being.

Reporting Work-Time Information and Activity:

Many companies require their sales representatives to submit daily call reports to
monitor work activities. Ethical compliance involves providing accurate and transparent
reports, ensuring that your activities are accurately reflected.
Switching Jobs:

Leaving a job ethically involves several important steps:

Provide ample notice, particularly during busy periods, to avoid causing significant
disruptions and lost sales opportunities for your employer.

Offer assistance during the transition phase, aiding your successor in understanding
your customers and territory, which is not only ethical but also a professional courtesy.

Avoid burning bridges by refraining from making hasty or angry statements that could
have negative repercussions in the future. Maintaining a positive relationship is essential if
you ever intend to return to the company or require a reference.

In summary, ethical conduct in the context of your relationship with your employing
company includes responsible use of resources, accurate reporting of work activities, and
maintaining professionalism when transitioning to a new job. These ethical practices
contribute to a positive work environment and ensure that you leave on good terms with your
current employer.

C. Building Relationships with Colleagues

Maintaining ethical relationships with colleagues is a crucial aspect of a successful

sales career, and it encompasses the following considerations:

Sexual Harassment:

Sexual harassment comprises unwelcome sexual advances, requests for sexual

favors, inappropriate jokes, offensive graffiti, and physical conduct. It can originate from
customers as well as co-workers. When dealing with sexual harassment from customers,
consider the following suggestions:

Avoid becoming overly dependent on one customer to the extent that you
compromise your ethical principles to retain their business. A diverse customer base
minimizes the influence of any single client.

Confront the harasser directly, either in person or through a written communication,

clearly stating that the behavior is offensive, unacceptable, and must cease. Assert your
control and unwillingness to tolerate such behavior.

Utilize the sexual harassment policies established by your firm and your customer's
organization to address these issues. Such policies outline the procedures for filing
complaints, designate the responsible person for investigating complaints, specify the
timeline for completing investigations, and detail the means by which parties will be informed
about the resolution.

Taking Advantage of Other Salespeople:

Unethical behavior can manifest when salespeople prioritize their personal goals to
an excessive degree, potentially at the expense of their colleagues. Ethical conduct
necessitates a balanced approach that values teamwork and cooperation.
D. Relationships with Competitors

Fostering ethical relationships with competitors is essential in the sales industry and
includes the following principles:

False Claims and Sabotage:

Making false claims about competitors' products or engaging in efforts to sabotage

their business is unequivocally unethical and often illegal. Such actions not only damage
your own integrity but can also result in legal consequences.

Criticizing a competitor's products or policies may be tempting, but it is generally an

ineffective approach. Ethical conduct encourages focusing on the merits of your own
products and services rather than disparaging others.

In conclusion, ethical behavior in the sales profession extends to relationships with

colleagues and competitors. It entails addressing and preventing sexual harassment,
avoiding unethical practices that harm colleagues, and competing on the merits of your
offerings rather than engaging in false claims or sabotage against competitors. Ethical
conduct contributes to a positive and professional sales environment.

Legal Considerations in Sales

Understanding the legal aspects of sales is vital to ensure that all activities comply
with established laws, regulations, and ethical standards. Here are key legal guidelines and
concepts:

Legal Guidelines in Selling:

Ensure that all statements regarding your product's performance are accurate.

Ensure that any positive claims about performance can be substantiated with
evidence.

If customers disregard warnings and operating instructions, remind them to review

this crucial information.

If customers are contemplating using the product incorrectly or for an inappropriate

application, provide clear guidance on proper use.

Assess your customer's experience and knowledge to tailor your approach

accordingly.

Avoid making negative statements about a competitor's product, financial condition,

or business practices.

Ethical and Legal Issues in International Selling:

In international sales, it's important to distinguish between "lubrication" and

"subordination" payments:

Lubrication involves small payments or gifts to low-ranking managers or officials in

countries where such payments are not illegal. These are made to expedite routine tasks.
 Subordination involves larger sums paid to higher-ranking officials to engage in
illegal acts or overlook unlawful activities.

Cultural Relativism:

Cultural relativism is the principle that individuals' beliefs and actions should be
understood within the context of their own culture. It suggests that what is considered moral
or ethical can vary widely between cultures, and no universal standard of morality exists.

Legal Issues:

Sales Puffery: Sales puffery involves exaggerated claims about a product's features.
While it may not be an outright lie, it distorts the truth.

Misrepresentation: Misrepresentation is a deliberate falsehood, such as claiming a

used car is brand new.

Illegal Business Practices:

Business Defamation: This occurs when a salesperson makes unfair or untrue

statements about a competitor, its products, or its salespeople. It is illegal if it damages the
competitor's reputation.

Reciprocity: A special relationship where two companies agree to buy from each
other. It is illegal when one company forces another into the agreement; it must be a mutual
agreement.

Tying Agreements: Requiring a buyer to purchase one product to obtain another.

These are legal only when the seller can demonstrate that the products must be used
together for proper functionality.

Conspiracy and Collusion: These involve competitors collaborating before or

during customer contracts, and they can be illegal.

Interference with Competitors: Salespeople may illegally interfere with competitors

through actions like enticing a customer to break a contract or tampering with a competitor's
product.

Restrictions on Resellers:

Resale Price Maintenance: It is illegal for companies to set a minimum resale price
for their products.

Spiffs or Push Money: Special incentives are legal if the reseller approves and
offers them to all salespeople.

Price Discrimination: Giving special prices, discounts, or services to some

customers but not others must be justified based on differences in cost, quality, or
competitive pricing.

Understanding and adhering to these legal guidelines and principles is essential for
ethical and compliant sales practices.
 POST-TEST: How much did you know?
1. Answer the examples of difficult situations that salespeople face given above and
explain your stand.

Activity 6

Give 10 examples of Cultural Relativism (cultural differences among different countries

in terms of selling).

Note: the activity should be submitted on our next face-to-face meeting.

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