2007 The McGraw-Hill Companies, Inc. All rights reserved.

CHAPTER 3

Ethical and Legal Issues in Selling

Some questions answered in this chapter are:
Why do salespeople need to develop their own codes of
ethics?
What 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?

3-2
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 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
Global Crown Capital

3-3
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Ethics and Personal Selling

Ethics are the principles governing

behavior of an individual or a group.
These principles establish appropriate
behavior, indicating what is right and
wrong.
What is ethical can vary from:
Country to country
Industry to industry

3-4
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Ethics and Personal Selling (continued)

Ethics and partnering relationships

Manipulation Persuasion is trying

eliminates or reduces to influence the
the buyers choice buyers decision, not
vs. force it.
unfairly.

3-5
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Factors Affecting Ethical Behavior of
Salespeople

3-6
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Ethics and Personal Selling (continued)

Factors influencing the ethical

behavior of salespeople
Personal, company, and customer needs
Company policies
Values of significant others
Laws
A personal code of ethics

3-7
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Conflicting Objectives

3-8
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Checklist for Making Ethical Decisions

Would I be embarrassed if a customer found out about this

behavior?
Would my supervisor disapprove of this behavior?
Would most salespeople feel that this behavior is unusual?
Am I about to do this because I think I can get away with it?
Would I be upset if a salesperson did this to me?
Would my family or friends think less of me if I told them about
engaging in this sales activity?
Am I concerned about the possible consequences of this
behavior?
Would I be upset if this behavior or activity were publicized in a
newspaper article?
Would society be worse off if everyone engaged in this
behavior or activity?

3-9
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Choices You Can Make if Your Manager
Asks You to Act Unethically

1. Ignore your personal values and do

what your company asks you to do.
2. Take a stand and tell your employer
what you think.
3. Refuse to compromise your
principles.

3-10
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Selling Ethics and Relationships

Relationships and customers

Deception
Bribes, gifts, and entertainment
Special treatment
Confidential information
Backdoor selling

3-11
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Buyers View of Unethical Sales
Behaviors

Exaggerates benefits of product.

Passes the blame for something he or she did to
someone else.
Lies about product availability.
Misrepresents guarantees.
Lies about competition.
Sells products that people do not need.
Makes promises that are not legally binding.
Is not interested in customer needs.
Answers questions even when he or she does not
know the correct answer.
Sells hazardous products.

3-12
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Selling Ethics and Relationships
(continued)

Relationships with the salespersons

company
Expense accounts
Reporting work-time information and
activities
Switching jobs

3-13
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Selling Ethics and Relationships
(continued)

Relationships with
colleagues
Sexual harassment
Taking advantage of
other salespeople
Relationships with
competitors

3-14
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Legal Issues

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

3-15
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Legal Issues (continued)

Uniform commercial
code
Agency
Sale
Title and risk of loss
Oral versus written
agreements
Obligations and
performance

3-16
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Legal Issues - Warranties

A warranty is an
assurance by the
seller that the
products will perform
as represented.
An expressed
warranty is an oral
or written statement
by the seller.

An implied warranty
is not actually stated
but is still an
obligation defined by
law.

3-17
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Legal Issues (continued)

Sales puffery
This is a top-notch product.
This product will last a lifetime.
Misrepresentation
Mechanically, this oil rig is a 9 on a
scale of 10.
Feel free to prescribe this drug to your
patients, doctor. Its nonaddicting.
Illegal business practices

3-18
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 Business Defamation

Reciprocity
Tying agreements
Conspiracy and collusion
Interference with
competitors
Restrictions on resellers
Price discrimination
Privacy laws
Do-not-call law

3-19
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 International Ethical and Legal Issues

Lubrication
Subordination
Resolving cultural differences
Legal issues

3-20
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.
 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.
Salespeoples 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.
Statutory laws guide the activities of salespeople
in the United States.

3-21
McGraw-Hill/Irwin 2007 The McGraw-Hill Companies, Inc. All rights reserved.