Chapter 02 – Ethical and Legal Issues in Selling
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
II. Selling Ethics and Relationships
A. Relationships with Customers
1. Deception
B. Relationships with the Salesperson’s Company
1. Expense Accounts
C. Relationships with Colleagues
D. Relationships with Competitors
V. Legal Issues
A. Uniform Commercial Code
1. Agency
2. Sale
B. Misrepresentation or Sales Puffery
Chapter 02 – Ethical and Legal Issues in Selling
C. Illegal Business Practices
1. Business Defamation
2. Reciprocity
3. Tying Agreements
VI. International Ethical and Legal Issues
A. Resolving Cultural Differences
B. Legal Issues
VII. Selling Yourself
Chapter 02 – Ethical and Legal Issues in Selling
Teaching Suggestions
1. Begin by asking your students to read through the opening profile regarding Teradata’s Jim
Keller. Ask students about his motivation for working as a sales representative, especially since
across his career he’s worked for a number of companies but only had the one account – FedEx.
Then ask them to define the term “representative”. 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?” Answers include the company, the customer, self and family,
industry, and profession. You can have other answers such as your university, society, and so
2. Add to this discussion the question of what makes a behavior unethical. For example, is asking
questions unethical? Review Exhibit 2.6, where one doctor has said he doesn’t appreciate and
won’t allow salespeople to ask questions. His perspective is very interesting and makes great
discussion in class. 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
status and using that information to set the price? Assume, for example, that you sell franchises.
You ask potential buyers for audited financial statements and tell them that you want to make
on what is fair.
3. Next, you could move the discussion toward the ethical conflicts confronting salespeople. Look at
Discussion Question 9, as these are real situations. You could discuss how the goals of the
Chapter 02 – Ethical and Legal Issues in Selling
4. Ask students to identify the rationalizations people make about engaging in unethical behavior.
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.
Chapter 02 – Ethical and Legal Issues in Selling
Suggested 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?
2. Do you think 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. For centuries the guideline for business transactions was the Latin term caveat emptor (let the
buyer beware). This principle suggests that the seller is not responsible for the buyer’s welfare. Is
this principle still appropriate in modern business transactions? Why or why not?
Traditionally business was conducted by traveling merchants who did not have repeated contacts
with buyers. Since the merchant’s future business would not be affected if the buyer was
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.
Chapter 02 – Ethical and Legal Issues in Selling
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
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. Your company has a contact management software system where you enter in all of the
information you can about your customers. The company wants to partner with another firm to
comarket products. They want to give your database to the other firm so the other firm can create
marketing pieces and e-mail them to your clients. Is this legal? Is it ethical? Why or why not?
This is not a smart idea, for if your clients find out your company did this, they may not trust you
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.
Chapter 02 – Ethical and Legal Issues in Selling
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.
b. A customer asks if you can remove a safety feature because it slows down the operators of the
equipment.
Clearly, if a salesperson says yes and someone gets hurt, the manufacturer of the equipment will
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.
Probably unethical – the practice is not only unethical but illegal if the situation is a government
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.
The practice is certainly legal and some might argue that it is no different from using a credit card
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
Chapter 02 – Ethical and Legal Issues in Selling
Suggested Answers to Case Problems
Case 2-1: Plaxico
Questions
1. How do you respond to the pricing issue if you can’t actually prove Notelli 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
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 Notelli. Wasn’t that a cheap shot at a
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 she do about the Farley situation? Should she try to find out if Crago plans to bid on
Farley contract and if so, what their strategy is?
No, she shouldn’t. Even if she knew their strategy, she shouldn’t disclose that, it wouldn’t be fair to
2. What should she do about the Hudson account?
The temptation is to violate company policy by lying to her company about a trial. A more legitimate
3. Describe her relationship with Mitch. Where should she go with this account in the future?
One would hope she had a partnership with her largest distributor, but it doesn’t look that
Chapter 02 – Ethical and Legal Issues in Selling
End of 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?
Chapter 2 role play Version B:
Chapter 2 role play Version C:
Chapter 02 – Ethical and Legal Issues in Selling
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.”
Offering gifts directly to a purchasing agent, like sales promotion prizes and “purchase volume
incentive bonuses.”
Asking for preferential treatment from a buyer who is also a supplier.
Asking for preferential treatment from your banker when that banker is considering a purchase
from you.
Exaggerating the seriousness of a problem in order to explain a delay in shipping.
Allowing for personalities—for example, liking one buyer more than others—to enter into the
pricing negotiation.
Trying to go directly to departments that use your product, because the purchasing agents won’t
see you.
Seeking information about competitors from good customers.
Raising prices when you know you are the only supplier for a company.
Asking for information about other bids so you can adjust yours.
Chapter 02 – Ethical and Legal Issues in Selling
Giving preferential treatment to a customer over another as compared to the usual treatment.
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.
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).
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:
Chapter 02 – Ethical and Legal Issues in Selling
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:
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:
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:
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
Chapter 02 – Ethical and Legal Issues in Selling
Reason:
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: