Chapter 2.
The Sales Environment

Building Relationships – Ethics and Sales Management
Supporting ethically sound behavior strengthens relationships and reputations
Managers must acknowledge their role in shaping organizational ethics
Ethics are not	individualistic unchanging, impervious to organizational influence
Example: Sears, Roebuck & Company automotive service business

Introduction
Selling has traditionally been perceived as a low-prestige job Students should be aware of the legal and ethical issues involved in selling

Why Discuss Ethics, Social Responsibility, Laws?
Complexity	Products More breakdowns Difficult to fix Transactions Assortment Financing Services included Life More choices Demands
Decline in pride of workmanship More Educated Consumers More Sophisticated Consumers Impersonal relationships in marketplace Lots of distractions to consumers

Legal Issues
Three basic forms of laws influence actions of U.S. salespeople
Common Law	Based on court decisions
Administrative Law	Set forth by regulatory agencies
	Statutory Law
	Based on legislation by states or Congress

Five antitrust acts
Link to a review at Findlaw.com Link to a review at the Federal Trade Commission
Sherman Act (1890)	Declares illegal every contract, combination, and conspiracy in restraint of trade of commerce that crosses state boundaries
Federal Trade Commission Act (1914)	Prohibits Unfair methods of competition Unfair or deceptive practices
Clayton Act (1914)	This act declares it to be unlawful In interstate commerce to sell or lease merchandise or equipment On the condition, agreement, understanding that the buyer will not use or deal in the merchandise of a competitor of the seller or lessor
Robinson-Patman Act (1936) FTC Update	Discrimination by a seller in price, services, and facilities in the sale of products of like grade and quality to two or more buyers
Wheeler-Lea Act(1938)	Amends section 5 of the federal trade commission act allows the FTC to act under broader circumstances
Specific Legal Concerns
Consumer Protection Laws Nolo's Article	Federal Trade Commission Act of 1914 Automobile Information Disclosure Act of 1968 The Consumer Credit Protection Act of 1968 The Magnuson-Moss Warranty/FTC Improvement Act of 1975 The Energy Policy and Conservation Act of 1976 (recent updates) The Fair Debt Collections Act of 1980
Antitrust Laws	Tie-in Arrangements Conspiracy Collusion Requirements Contracts Exclusive Dealing Price Discrimination FTC Antitrust Primer Site
Unfair Trade Practices	Unfair product practices - Usually involves shipping practices of orders Push money Bribes and kickbacks Contract breaking, tampering with products, etc Reciprocity Unfair Influence of Buyers’ Employees Unfair Interference with Competitors Reciprocity FTC's List of Illegal Business Practices
Fraud and Misrepresentation	Uniform Commercial Code The Nature and Form of Sales Risk and Property Rights Obligations and Performance Warranties Agency California Commercial Code
Problems Associated with Direct Selling	Sales Employees versus Independent Contractors Local Ordinances Doorstep Identification Pyramid Selling and MLM The Cross-Group Selling Rule The Retail Store Rule
Cooling off	Limited to sales made outside the seller’s place of business The sale can be canceled by written notice mailed to the seller within three business days after the transaction Notice of cancellation privilege must be given to the buyer Credit sales are covered in all statutes, cash sales in some A number of statutes exempt sales under a certain amount, and some have special exemptions when the buyer has a critical need, etc There is usually no penalty for cancellation, although 5 percent of the cash price or the down payment, whichever is less, is sometimes permitted
Equal Employment Opportunity Laws

Ethical Issues
Ethical conduct is a major concern Selling Power Article
Research indicates there is an ethical role conflict associated with aspects of the sales job
Creating Ethical Corporate Structures	Example: Security Pacific’s Corporate Credo Example: Johnson & Johnson’s Corporate Credo
Relationships with Customers	Bribes, Gifts, and Entertainment Betraying a Confidence Other Conflicts
Relationships with Competitors	Experienced Salespersons Needed Quickly Competitor’s Product Introduced by Prospect Unattended Display or Machine
Relationship with Company	Expense Padding "Goofing Off" Cheating in Sales Contests Taking Company Secrets
Relationships with Society	Firm’s responsibility to society Corporate social responsibilities Economic Legal Ethical Philanthropic
The Decline of Ethical Behavior
Ethical behavior at American companies is on the decline.(Chief Executive magazine 12/1995) Survey of 4,035 workers conducted by the Ethics Resource Center, 56 percent reported lying to supervisors as the major misconduct at their companies. Additional research showed that 55 percent of middle managers don't believe top executives. . Respondents also complained that they are pressured to support incorrect viewpoints, sign false statements overlook the wrongdoing of supervisors. For more information, contact the Ethics Resource Center 1120 G St. NW, Ste. 200, Washington, DC 20005 (202) 737-2258, Center For Business Ethics Bentley College, 175 Forest St., Waltham, MA 02154-4705 (617) 891-2981.

Summary
1. A salesperson should know where the legal danger zone lies and abide by the laws governing business.
2. The selling company, the sales manger, and the salespeople all must be committed to ethical conduct
3. Business Ethics Links