CHAPTER 2
ETHICAL AND LEGAL ISSUES IN SELLING
Outline of Chapter
I. Ethics and Personal Selling
A. Ethics and Partnering Relationships
B. Factors Influencing the Ethical Behavior of Salespeople
1. Personal, Company, and Customer Needs
2. Company Policies
3. Values of Significant Others
4. Laws
5. A Personal Code of Ethics
II. Selling Ethics and Relationships
A. Relationships with Customers
1. Deception
2. Bribes, Gifts, and Entertainment
3. Special Treatment
4. Confidential Information
5. Backdoor Selling
B. Relationships with the Salesperson’s Company
1. Expense Accounts
2. Reporting Work-Time Information and Activities
3. Switching Jobs
C. Relationships with Colleagues
1. Sexual Harassment
2. Taking Advantage of Other Salespeople
D. Relationships with Competitors
V. Legal Issues
A. Uniform Commercial Code
1. Agency
2. Sale
3. Title and Risk of Loss
4. Oral versus Written Agreements
5. Obligations and Performance
6. Warranties
B. Misrepresentation or Sales Puffery
C. Illegal Business Practices
1. Business Defamation
2. Reciprocity
3. Tying Agreements
4. Conspiracy and Collusion
5. Interference with Competitors
6. Restrictions on Resellers
7. Price Discrimination
8. Privacy laws
9. Do-Not-Call Law
VI. International Ethical and Legal Issues
A. Resolving Cultural Differences
B. Legal Issues
VII. Selling Yourself
Teaching Suggestions
1. Begin by asking your students to read through the opening profile regarding Jessica Lehrer. Ask
students about her motivation for working as a sales representative, especially since she is a
mechanical engineer. Then ask them to define the term “representative“. If students struggle, ask
who Jessica represents when she carefully goes over a contract and points out the “bad” things to a
customer? The definition that works best for this class is that a representative is someone who
acts for someone else. Why does someone act for someone else? Because they either can’t or
won’t act for themselves. Then ask students “Who does the sales representative represent?”
2. Add to this discussion the question of what makes a behavior unethical. For example, is asking
questions unethical? Ask students: How can you tell what a customer’s needs are if you can’t ask
questions? Then turn the tables a little. What about asking questions about the buyer’s financial
3. Next, you could move the discussion toward the ethical conflicts confronting salespeople. Recall
from Jessica Lehrer’s profile that she refuses to accept gifts – why would a buyer offer her gifts?
Discussion Question 8 offers an excessive gift example from a buyer (and is a true story). Look at
Discussion Question 9, as these are real situations as well. You could discuss how the goals of the
4. Ask students to identify the rationalizations people make about engaging in unethical behavior.
Suggest that if they find themselves using some of these statements, it may be an indication that the
behavior they are about to engage in may not be ethical.
5. This last discussion is a good lead-in to some questions one could ask oneself to help identify
potentially unethical behaviors. We have found this exercise to be especially useful: Have your
6. We feel the best way to convey the principles of ethics to students is to have them confront
situations, make choices, and justify them. Cases in the text provide opportunities for students to
confront such issues and make for great class discussion.
7. After a discussion of all the ways one could run afoul of the law, you could suggest ways of
8. Sexual harassment is an important issue to discussion. Salespeople can encounter harassment in
dealing with customers, their colleagues, and their supervisor. In this chapter, we focus more on
9. Finally, the issues of ethical and legal issues should be related back to developing long–term,
partnering relationships with customer. You might ask the students how importance ethical and
legal issues are in the different type of relationships.
S uggested Answers to Questions and Problems
1. There are certainly many ethical and legal issues in selling, as this chapter demonstrates. Do
you think there are more ethical and legal issues in selling than other jobs, such as accounting,
finance, retail store management, or the like? Which issues raised in the chapter likely to be
present, no matter the job, and which are likely to be specific to sales jobs?
Interestingly, many of the bigger cases involving unethical behavior did not involve sales activities,
though they may have involved customers. For example, making and selling faulty products in
2. Do you think social media and the Internet has made salespeople more ethical? Why or why not?
One argument could be that the Internet makes all behavior so public that it adds a watchdog
3. How has the evolution of selling influenced ethics in professional selling?
Because most transactional selling, where the goal is to get the sale and get on to the next one, has
4. What’s the difference between manipulation and persuasion? Give two examples of what would
be considered manipulation and alternatives of acceptable persuasion. Then describe how your
examples of manipulation might fall into the realm of illegal activity and under which law or
laws.
The difference is the customer’s ability or opportunity to make his or her own decision.
5. Some professors believe that ethics cannot be taught. Do you agree? Why or why not?
Profs who believe ethics cannot be taught are really saying that they believe that they cannot make
What do you think Jim Keller’s (in The Buyer’s Seat 2.1) answer would be to this question?
Why? Would his answer differ from that of someone who sells to consumers?
I’ve asked Jim this question and he believes that it can be taught; it’s just that some people don’t
6. Your customer asks you what you think of a competitor’s product. You know from experience with
other customers that it is very unreliable and breaks down frequently. Further, given this
particular customer’s needs, you expect that it would be an even bigger problem if the customer
chose this product. How do you respond? Be specific as to what you would say.
While answers will vary from student to student, they should have the elements of avoiding direct
7. Using the scenario from question 6, you have a product that competes directly against the
competitor’s product brought up by the customer and costs about the same—do you bring up the
costs? Your product that serves the customer’s needs best costs 20 percent more and you know
that budget is an issue. What do you do? Again, write out exactly what you would say.
8. One of our students shared the story of how his family was able to spend their vacation on a
private Caribbean island – no exaggeration – as a guest of one of his father’s clients. While that
may be extreme, what might the ethical issues be with accepting a gift from a customer? How
should you respond if offered a gift?
9. For each of the following situations, evaluate the salesperson’s action and indicate what you
think the appropriate action would be.
a. In an electronics store, salespeople are offered an extra $50 for each sale of HDTV models
that are being closed out. The manufacturer is offering the spiff, and management is fully aware
of it. Salespeople are encouraged to not mention either the spiff or that these are close-out
models.
that.
b. A customer asks if you can remove a safety feature because it slows down the operators of the
equipment.
c. The custom of the trade is that competitive firms submit bids based on specifications
provided by the buyer; then the buyer places an order with the firm offering the lowest bid. After
a salesperson submits a bid, the purchasing agent calls him and indicates the bid is too high; the
lowest bid so far is almost 8 percent lower than that. The buyer asks the salesperson to submit
another bid at a price at least 10 percent lower.
d. A few months after joining a company, you learn about a credit card that gives you a 20
percent cash refund on meals at certain restaurants. You get the card and start taking clients
only to those restaurants offering the rebate, pocketing the rebate.
that is obviously “on sale,” as would be the case with a cash discount.
e. A customer gives a salesperson a suggestion for a new service. The salesperson does not turn
in the idea to her company, even though the company’s policy manual states that all customer
ideas should be submitted with the monthly expense report. Instead, the salesperson quits her job
and starts her own business using the customer’s suggestion.
Suggested Answers to Case Problems
Case 2-1: Barton Hargrave
Questions
1. How do you respond to the pricing issue if you can’t actually prove Ruhter is lying until a customer
tries them and then realizes it is more?
One way is to probe with customers to determine how much they are actually being charged or going to
2. How do you respond to the question about leaving the business? What if a client asked about the
lawsuit directly, saying, “I hear your company filed suit against Ruhter. Wasn’t that a cheap shot at a
competitor?”
The only way to handle the question is with a straight denial, then point out that some competitors may
wish you were exiting the business but there’s no truth to that rumor. In most situations like this, the
Note: This scenario is based on a situation faced by one of our former students. The names and industry have been
changed, but the situation is real.
Case 2-2: DuBois Polymers
Questions
1. What should Josh do about the Boise situation? Should he try to find out if Boise plans to bid on
Farley contract and if so, what their strategy is?
2. What should Josh do about the Mohawk account?
The temptation is to violate company policy by lying to her company about a trial. A more legitimate
approach would be to give the trial amount directly to Mohawk as a legitimate trial, with the approval
3. Describe Josh’s relationship with Marsha. Where should he go with this account in the future?
One would hope Josh had a partnership with the largest distributor, but it doesn’t look that
hit.
End o f Chapter Role Play Case
Copy a buyer sheet for each student in the class. There are three versions. After the role play, you may
want to begin debriefing this by asking how they handled each situation. Start with Version A, but divide it
into those who were asked to adjourn for margaritas and those who were asked to visit a strip club. Further,
you can then discuss what might happen if a female salesperson was asked by a male buyer to attend a strip
club (according to articles in the trade press, this does happen, and is more likely to happen in male–
dominated industries). You can then ask how common each situation is. With Version C (which is based on
a real article), why might a buyer consider this to be an ethical issue?
Chapter 2 role play Version A:
If the rep is of the opposite sex, respond to the request for the sale like this. “Well, it all sounds good, but
I’m not quite convinced. Why don’t we adjourn to this little place I know down the street and talk it over?
They have the best margaritas in town.” If the rep is of the same sex, respond to the request like this. “Well,
it all sounds good, but I’m not quite convinced. Say, there’s this place down the street, totally nude, and the
dancers are really hot. Why don’t we move this conversation over there?”
Chapter 2 role play Version B:
Respond like this. “Well, it all sounds good but I’ve got good people, they’ll figure it out. And I have no
money in the budget for this. I know you said that training is another 20% but if you’ll throw in free
training, I’ll take it.” If the rep says yes, then say, “Ok, I’ll check with the CFO and see what we can do.
But I’ll warn you, she’s a cheapskate and she’ll probably want you to sweeten the deal.”
Chapter 2 role play Version C:
Your response is: “I don’t know. I read in Computing Magazine that people are unhappy with Gartner and
that Gartner isn’t acknowledging the problem. I’m not sure that is the type of company I want to do
business with.”
EXERCISE 2-1 IDENTIFYING YOUR ETHICAL DECISION PROCESS
Below is a list of activities and behaviors that a salesperson may engage in. Under what conditions would
the behavior be ethical or unethical? If the behavior is always ethical, write “Always ethical,” or list any
situational influences that determine if the behavior is ethical or unethical, or write “Always unethical.”
1. Offering gifts directly to a purchasing agent, like sales promotion prizes and “purchase volume
incentive bonuses.”
2. Asking for preferential treatment from a buyer who is also a supplier.
3. Asking for preferential treatment from your banker when that banker is considering a purchase
from you.
4. Exaggerating the seriousness of a problem in order to explain a delay in shipping.
5. Allowing for personalities—for example, liking one buyer more than others—to enter into the
pricing negotiation.
6. Trying to go directly to departments that use your product, because the purchasing agents won’t
see you.
7. Seeking information about competitors from good customers.
8. Raising prices when you know you are the only supplier for a company.
9. Asking for information about other bids so you can adjust yours.
10. Giving preferential treatment to a customer over another as compared to the usual treatment.
11. Writing off the cost of duplicating a proposal for a buyer as a travel expense because the
company doesn’t let you write off copying expenses.
12. Taking the afternoon off after making a big sale.
Go back to the previous page and review your responses. Were you able to identify situations which made a
behavior ethical? Situations that made it unethical? If you used a lot of situations to explain when
something might be ethical or unethical, then you may have a situational perspective on ethics. If the
converse is true, then you may have a deterministic perspective. The idea is that some people like believe
that the ethicality of an action can only be determined by understanding the situation (e.g. it’s okay to steal
to feed yourself). Others say that the situation does not determine ethicality, a higher code of conduct does
(e.g. it is never okay to steal).
Now consider the constituents that were involved in each decision. Who would be hurt by the action? Go
back and add that to each situation. Consider the impact on the buyer, the seller, their companies, and
society in general. What you have just done is taken another approach to determining the ethicality of an
action: the consistency approach. This approach looks at who is hurt and who is benefited. If benefits
outweigh the hurts, then the action is ethical. The difficulty, of course, is deterring the value of the benefits
and the costs of the hurts. One version of this considers who will find out about the action. Only if someone
else (who can punish the salesperson) finds out about the act is it considered ethical. From a societal
perspective, that approach is not very helpful!
Which approach describes you the best? Can you think of any ethical dilemmas you might have faced? Did
you use one of these approaches in resolving your conflict?
Now consider the following scenarios and rate the salesperson’s behavior:
1. The customer signs the order but fails to initial one of the little boxes, the one that determines how
long the rental agreement is for. Your don’t notice until you get back to the office, 45 minutes
away. You know that the customer wanted a 24 month lease so you just initial it and turn it in.
Illegal
Unethical or immoral
Ethical but inappropriate
No problem
Reason:
2. You convince a physician who has just opened a new practice to purchase an unusually large
amount of supplies, informing him that he will get an excellent discount.
Illegal
Unethical or immoral
Ethical but inappropriate
No problem
Reason:
3. You have a customer awaiting a shipment that is due to arrive tomorrow. If the customer knew it,
though, they could wait until next week when the product goes on sale and save a bundle.
Illegal
Unethical or immoral
Ethical but inappropriate
No problem
Reason:
4. An employee (of the opposite sex) of the buyer’s company, but not the buyer, asks you out as you
are leaving the plant after making a sales call
Illegal
Unethical or immoral
Ethical but inappropriate
No problem
Reason:
5. The buyer offers to take you out to dinner to say thank you for all your support for their
company.
Illegal
Unethical or immoral
Ethical but inappropriate
No problem
Reason: